S & P warns Russia of weak growth
The Western sanctions over Moscow's role in the Ukraine war have pummelled its economy
MOSCOW (AFP) - Standard and Poor s stripped Russia of its investment-grade rating on Monday, cutting it to "junk" status with a warning of weak growth.
"The downgrade reflects our view that Russia s monetary policy flexibility has become more limited and its economic growth prospects have weakened," the ratings agency said in a statement announcing the one-notch cut to a BB+ rating.
The plunge in oil prices and Western sanctions over Moscow s role in the Ukraine war have pummelled the Russian economy in recent months, with the ruble collapsing in value.
Russia s finance minister on Monday criticised Standard & Poor s rating agency for its decision to cut the country s rating from investment-grade to "junk" status.
Russian Finance Minister Anton Siluanov said the downgrade showed "excessive pessimism. It doesn t take into account a whole series of factors showing the strong side of the Russian economy."
"We see no reason to dramatise the situation," he told Russian news agencies.
Standard and Poor s is the first major international ratings agency to move Russia down into the speculative or "junk" territory after last downgrading Russia in April.
Standard and Poor s now forecasts that Russia s oil-dependent economy will contract by 2.6 percent in 2015 due to the fall in crude prices and Western sanctions over Ukraine.
Many analysts however have said that it does not appear as if there is a clear plan in place, and reports have said that state television even issued a ban on the expression "economic crisis".
"This is just the beginning of the fall for the Russian economy," analyst Sergei Aleksashenko, a former deputy head of the Central Bank, told the Echo of Moscow radio, adding that the anti-crisis plan on the table now will not work as long as oil prices -- Russia s main export commodity -- remain at their current lows.
The price of a barrel of oil has fallen from over $100 last June to under $50.
Standard and Poor s was not confident about the Russian government s ability to restore long-term growth.
"We do not currently expect that the government will be able to effectively tackle the long-standing structural obstacles to stronger economic growth over our 2015-2018 forecast horizon," it said.
Those problems include perceived corruption, the weak rule of law, the state s pervasive role in the economy, and the challenging business and investment climate, according to the ratings agency.
Standard and Poor s put the outlook on the BB+ rating as negative.
