RISK: S&P downgrades Russia’s credit rating to junk

Both Western sanctions and falling oil prices have hit the Russian economy hard

As Russia’s oil exports bring in less revenue and its currency drops, Standard & Poors has downgraded the country’s credit rating to junk.

“In our view, the Russian Federation’s monetary policy flexibility has weakened, as have its economic growth prospects,” S&P explains.

Both Western sanctions and falling oil prices have hit the Russian economy hard.

After the downgrade from a BBB- to a BB+ rating, Russian currency fell 7 percent to 68.5 rubles to the U.S. dollar.

Capital outflows averaged $57 billion annually between 2009-2013, but jumped to $152 billion last year. For the first time in Putin’s presidency, the Russian economy is expected to contract.

Finance Minister Anton Siluanov dismissed the rating downgrade, saying S&P was overly pessimistic. He stressed the country’s high level of hard currency reserves, trade surplus and low level of state debt.

“There is no need to overdramatize the situation,” Siluanov told Russian news agencies.

During a Cabinet meeting before S&P’s announcement, Putin urged spending cuts, keeping inflation under control and not wasting hard currency reserves.

Copyright © 2017 Transcontinental Media G.P.
Transcontinental Media G.P.