Fitch and S&P downgrade Ukraine’s rating, Moody’s warns Ukraine and Russia

The conflict between Ukraine and Russia unleashed a series of movements in the sovereign risk of both governments by the rating agencies, but unevenly.

This last Saturday, February 26, the qualifiers S&P Ratings and Fitch downgraded the Ukrainian debt note, while Moody’s warned both nations that they could downgrade their rating due to the risk of default.

Thus, Ukraine’s debt note fell from B to B-; according S&P Ratings negative outlook, which means the agency could discount you even more in the future.

The Russian invasion imposes “significant negative risks” to Ukraine’s economic prospects, “endangering the servicing of the debt” subscribed by economic operators, he noted. S&P it’s a statement.

“Ukraine now faces possible disruptions in some key economic sectors, such as its large agricultural exports and its network of gas pipelines,” he said.

Meanwhile, the rating agency lowered Russia’s foreign currency debt from BB+ to BBB-, placing it below investment grade: for which it warned that it could lower the ratings further, after obtaining more clarity on the macroeconomic repercussions of the sanctions.

“In our view, the sanctions announced to date could have significant negative implications for the Russian banking sector’s ability to act as a financial intermediary for international trade,” S&P said.

A day earlier, on February 25, the rating agency Fitch downgraded the Ukrainian debt from “B” to “CCC”, alleging that the Russian invasion generates a “severe negative shock”.

“Russia’s military invasion has resulted in increased risks to Ukraine’s public and external finances, macro-financial stability and political stability,” Fitch said, highlighting “high uncertainty” about the duration of the conflict.

Along these lines, he justified his decision in that “there is high uncertainty about the scope of Russia’s final objectives, the duration, breadth and intensity of the conflict, and its consequences.”

He also highlighted Ukraine’s “fairly low external liquidity” related to its $4.3 billion debt, saying “expected capital outflows will further weaken its external financing position.”

“The shock to domestic confidence is expected to have a severe impact on economic activity and coinfueling inflationary pressure and macroeconomic volatility,” Fitch said, adding that “public finances may be impacted by higher military spending” and “the ability to finance debt will be severely limited.”

For its part, the risk rating agency Moody’s Investors Service warned that it could downgrade the debts of both Ukraine and Russia due to the war.

The Slavic nation now has a Baa3 “investment grade” rating from Moody’s.

Moody’s will seek to conclude the review when these credit implications become clearer, particularly as the impact of further sanctions takes shape in the coming days or weeks.

With information from AFP, WJS and Reuters.