S&P affirms Ukraine B rating, Stable outlook

S&P Global Ratings agency has affirmed its
long-term foreign and local currency sovereign ratings on Ukraine at B and
their Stable outlook, it reported on Mar. 13. In doing so, the agency noted
Ukraine’s high gross foreign reserves and declining state debt-to-GDP ratio,
while pointing at risks related to the refinancing of external debt in the
short term. It also said the implications of the recent government reshuffle in
Ukraine are uncertain for the country’s relationships with its key creditors.
S&P may consider an upgrade of its rating in the next year “if the
government makes progress on its reform agenda while preserving earlier
achievements,” the key to which is maintaining the central bank’s independence.
The rating may be downgraded in case of “disruptions to funding from
concessional programs or capital markets” become apparent, which “could happen
if the government were to backtrack on key reforms.”

S&P analysts forecast that Ukraine’s real GDP will
slow down from 3.3% in 2019 to 2.5% in 2020, while it will grow by 3.2% in 2021
and 3.0% in 2022. They project the hryvnia at 24.5/USD in 2020, on average,
25.4/USD in 2021 and 26.0/USD in 2022.

Alexander Paraschiy: Some of
S&P’s forecasted indicators, such as the exchange rate, are already
outdated as the hryvnia has depreciated about 2.7% in the last week to about
26.0 UAH/USD, with little prospects to return to the UAH 24.5/USD mark this
year. Also, it might happen that the S&P credit rating and outlook for
Ukraine will become outdated as soon as this week, which could prove decisive
in determining the prospects for Ukraine to reach an IMF loan deal.

Today, Ukraine’s Supreme Court will hear a
complaint about the bailed-in deposits of the Surkis family in Privatbank
(PRBANK), which was recognized insolvent and nationalized in 2016. A court
ruling against the bail in could lead to the IMF, in reaction, distancing
itself from the loan deal and increase of Ukraine’s sovereign risk.