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Standard & Poor's confirmed negative outlook for long-term rating of Ukraine

03 September 2015 | Thursday
URE Club

Rating agency Standard & Poor's has offered its view not only on the deal Ukraine has struck with its creditors, but on the outlook for the economy.

The rating of the government in Kiev was kept at CC and the outlook at negative, with analysts at S&P arguing "we would classify any exchange offer or similar restructuring of Ukraine's foreign currency debt as a default under our criteria."

Given Ukraine's ambition is to pull the economy out from its deep recession, arguably the most telling portion of the note from S&P is here:

  • Ukraine's macroeconomic situation remains challenging. In our view, the biggest risks to regaining sustainable economic growth, and therefore sustainable debt levels, include re-establishing financial-sector and exchange-rate stability.
  • These in turn depend primarily on exogenous factors, such as the country's terms of trade and on the military conflict in the east of the country, which is undermining trade and confidence.
  • Following last year's 7% real GDP contraction, we expect the economy to contract by around 15% during 2015, reflecting low confidence and damaged financial stability, given persistent tensions in eastern Ukraine ahead of upcoming local elections.
  • Until last year, Russia was Ukraine's top export destination, absorbing 24% of all exports; since 2014, Russia has introduced embargoes on some imports from Ukraine, while Russian demand has stalled due to falling terms of trade there.
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Source: http://www.ft.com


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