Fitch downgraded the sovereign rating of Ukraine. When calculating in the national currency, the rate dropped from «B-» to “CCC”. Also confirmed the rating «CCC» in foreign currency.
In a statement, the agency reported that the new Ukrainian government signed an agreement with the IMF and embarked on a series of economic reforms. In addition, in October of this year in government elections will be held, which may enhance the support for the program. However, economic and political risks are so high that the effect of innovations in the economy may be quite small. Among these risks, Fitch notes the unstable situation in the east of Ukraine and the conflict with Russia. Government returned part of its territory, but it does not mean that now the military action would be discontinued. Because of this, the restoration of industry and other sectors of the economy will be difficult.
Analysts expect a decline in real GDP in Ukraine in 2014. at least 6.5%. They also believe that in the next two years in Ukraine there will be no economic growth. There are several factors that are causing the recession. Firstly, at the beginning of 2014. supplies of Ukrainian products to Russia decreased by almost a quarter, and secondly RF reduced gas supplies and Ukraine now may face a lack of energy.
It should be noted and the deterioration of the government’s solvency. According to experts, the total budget deficit by the end of this year to reach 10% of GDP. Fitch analysts also noted a significant impairment of hryvnia, which has lost since December 2013. more than 37% against the currency of the United States. Because of this, the quality of the assets of the banking system declined and the government had to further increase the budget by 30 billion hryvnia to ensure uninterrupted payment of contributions.
August 24, 2014
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