Fitch Ratings has revised the Outlook on Ukraine’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Positive and affirmed the IDR at ‘B’.
“The revision of Ukraine’s Outlook to Stable reflects the significant impact of the COVID-19 pandemic… The heightened macroeconomic and fiscal risks associated with this unprecedented global shock will partially reverse Ukraine’s improvements in recent years in terms of a declining debt burden, the normalisation of growth prospects after the 2014-2015 geopolitical and economic crises, and reduced growth volatility,” Fitch said.
Fitch forecasts the economy will contract by 6.5% in 2020, compared with 3.2% growth in 2019, reflecting the COVID-19 pandemic shock to the global economy, containment measures and a weaker currency affecting investment and private consumption. Consumption will be further hindered by the expected decline in household remittances (7.8% of GDP in 2019).
Fitch said that the shock will be partly cushioned by Ukraine’s low reliance on tourism, relatively more diversified commodity exports (including 40% soft commodities) and lower international oil prices given its net importer status.
“We expect the economy to recover to 3.5% in 2021, in line with our medium-term growth view for Ukraine. However, there are material downside risks to our forecasts, given the uncertainty around the extent and duration of the coronavirus outbreak,” Fitch said.
The next scheduled review date for Fitch’s sovereign rating on Ukraine will be September 4, 2020.
