S&P cuts Russia's foreign currency ratings

Friday, April 25, 2014

There is strong possibility of capital outflow from Russian economy due the tense geopolitical situation between Russia and Ukraine , S&P reported.

There is strong possibility of capital outflow from Russian economy due the tense geopolitical situation between Russia and Ukraine , S&P reported.

ANKARA -  S&P, one of most prominent credit-rating agencies, downgraded the long and short-term foreign currency sovereign ratings of the Russian Federation from BBB/A-2 to BBB-/A-3, citing “deteriorating external profile”, the agency said.

"The downgrade reflects the risk we perceive of a continuation of the large financial outflows observed in the first quarter of 2014, during which the size of Russia's financial account deficit was almost twice that of the current account surplus," the agency said in a press release on its website on 25 April.

Reports stressed the strong possibility of significant outflows of both foreign and domestic capital from the Russian economy due the tense geopolitical situation between Russia and Ukraine, pointing to the trend of the realized capital outflow of $51 billion in the first quarter of 2014.

“We expect Russia's current account surpluses to disappear by 2015, owing to imports rising faster than exports. We note however, that further ruble weakness could weigh on imports and postpone or even prevent the current account from shifting into deficit,” the report said.

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