S&P Downgrades Russia's Credit Rating to `Junk`

Russia | January 27, 2015, Tuesday // 10:05|  views

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The US rating agency Standard & Poor's (S&P) has downgraded Russia's credit rating to junk, which is below investment grade.

Russia's credit rating has been lowered to such a level for the first time in a decade, Bloomberg reports.

Having a rating of BB+, Russia is on a par with Bulgaria and Indonesia, which makes it difficult for Moscow to borrow money from investors.

S&P explained in a statement that the flexibility of the country's monetary policy has become increasingly limited and the prospects for economic growth have weakened.

The country's economy has been in free fall since the middle of last year due to the drop in oil prices and the imposition of international sanctions on Russia for its involvement in Ukraine.

Oil prices have decreased with over 50 % since the middle of last year, which has considerably reduced the incomes for Russia's oil industry.

According to expectations, the Russian economy is to contract with 4-5 % in 2015.

Although Russian Finance Minister Anton Siluanov dismissed the move of S&P as an “excessive pessimism”, the rouble recorded a further drop against the dollar, falling with 7.5 %.

But some experts in the country suggest a negative reaction could be expected on the market Tuesday. Even if the political and geopolitical situation is stabilized and starts improving, an upgrade of the rating usually takes some time," Russian economist Vladimir Tihomirov has told business daily RBC. In his words, the new value of Russia's credit rating could have a negative impact on the rouble, with investors likely to dispose of Russian assets.

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Tags: Russia, credit rating, S&P, downgrade, oil prices, economy, sanctions, rouble, investment, Ukraine


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