Russia Rating Cut by Moody’s on Sluggish Economic Growth
Russia’s credit rating was cut to the second-lowest investment grade by Moody’s Investors Service, which cited sluggish growth prospects and an erosion of the country’s reserves amid sanctions over Ukraine.
Moody’s downgraded the sovereign one level to Baa2 from Baa1 and kept a negative outlook on the rating on Oct. 17.
Russia has spent $13 billion from its foreign reserves this month to slow the ruble’s weakening as tumbling oil prices add to the woes of an economy that’s teetering toward recession amid the sanctions by the U.S. and European Union.
“It’s negative news, but it’s not really critical because it’s still an investment grade,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp. in Moscow, said by phone yesterday.
The downgrade is driven by “Russia’s increasingly subdued medium-term growth prospect,” Kristin Lindow, an analyst at Moody’s Investors Service Inc., said in a phone interview on Oct. 17.
The extra yield investors demand to own Russia’s dollar-denominated government bonds due in September 2023 instead of similar Treasuries was 2.81 percentage points on Oct. 17, compared with an average of 2.61 since the notes were sold 13 months ago, according to data compiled by Bloomberg.
The ruble has lost 13 percent against the dollar in the past three months, more than any other currency tracked by Bloomberg, extending its drop this year to 19 percent.
“Bank of Russia, on the one hand, will pursue balanced financial policies,” Putin told reporters on a trip to Milan. “That means that it will use elements of a floating exchange rate and won’t mindlessly burn up all its reserves. But there’s enough reserves to adjust the level of the national currency.”
Source: bloomberg- Russia Rating Cut by Moody’s on Sluggish Economic Growth
