S&P Confirms Ukraine’s Sovereign Ratings

Standard & Poor’s Ratings Services affirmed its BB- long-term foreign, BB long-term local, and B short-term sovereign credit ratings on Ukraine, reflecting fiscal concerns arising from a shortened electoral cycle. The ‘4’ recovery rating on Ukraine’s foreign currency debt, ‘uaAA’ national scale rating, and ‘BB’ transfer and convertibility (T&C) assessment were confirmed. The outlook is negative. Oleksandr Klymchuk: In a nutshell, S&P notes that general government debt (12% of GDP) is well below the BB median (40% of GDP), acknowledges Ukraine’s strong record in attracting FDI, and states that the country’s long-term growth prospects remain among the best in the region, but S&P is concerned about political risks, fiscal discipline and overdue tightening of banking supervision. The announcement effectively put to rest rumors of a downward revision that surfaced yesterday. Furthermore, we believe S&P’s concerns are a bit exaggerated and stick to our previous opinion that Ukraine’s sovereign ratings are too conservative. We expect election results and the creation of new government to be a trigger that might result in ratings upgrades from Moody’s and Fitch (both have positive outlooks on Ukraine’s ratings).