Russia's economy suffered another blow. Rating agency Standard & Poor's downgraded the credit rating of Russia from BBB- to BB+, that is even below investment grade, Joinfo.ua reports with reference to The Wall Street Journal. As the newspaper writes, it happened for the first time in more than 10 years.
In this case, after having reduced the country's rating to the "junk" one, the agency notes that there remains negative outlook regarding Russia and in the future the rating may be lowered further. The main reason for the downgrade was the exclusive dependence of the Russian economy on energy exports and the possibility of introducing additional sanctions against Russia.
"The outlook is already very bleak, as the economy is firmly on the path that leads to recession following the sharp fall in oil and the full-scale currency crisis that unfolded in December," said Piotr Matys, a rates strategist at Rabobank. According to him, the downgrade to junk cements the underlying trend of investors selling off their assets in Russia, which means that Russia's central bank will have to support the ruble by keeping interest rates at 17% and may have to intervene directly in the foreign-exchange market.
Standard & Poor's expects that the Russian economy will expand by about 0.5% per year from 2015 through 2018, and the budget deficit will be 2.5%. According to the experts of the agency, inflation will rise above 10%.
The analysts believe investors will be able to return to Russia if the sanctions are eased and oil prices are increased.
Recently, Western experts have noted that today's Russian economy sets records on capital outflow.
Due to the constant ruble fall the Russian economy is on the verge of "junk" level. Many Russian experts and, in particular, Alexei Kudrin, the ex-finance minister and the head of the Committee of Civil Initiatives predicted that in January 2015 the international rating agency Standard & Poor's would announce the downgrade of the sovereign credit rating of Russia. Russia's downgrade will make investors sell Eurobonds, since they will not need below investment grade securities.