Fitch Ratings has affirmed Ukraine’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’ with a stable outlook, the agency said on its website.
“Ukraine’s ‘B’ IDRs reflect its track record of multilateral support and a credible macroeconomic policy framework that has underpinned a relatively high degree of resilience to the coronavirus shock. Ukraine’s human development indicators compare favorably with the peer group, it has a net external creditor position of close to 13% of GDP, and general government debt is somewhat lower than the ‘B’ median. Set against these factors are weak governance indicators, a high degree of legislative and judicial risk to policy implementation, and low external liquidity relative to a large sovereign external debt service requirement,” the report says.
“The stable outlook reflects expectations for gradual fiscal consolidation and continuation of macroeconomic policies that helped preserve broad stability in external finances during last year’s shock. The ability to issue eurobonds and available domestic liquidity has provided some limited space to manage a delay over the next six months in completing the first review of the IMF Stand-By Arrangement (SBA). The coronavirus shock temporarily reversed improvements made in recent years in terms of a declining debt burden and normalization of growth prospects after the 2014-2015 geopolitical and economic crises. At the same time, the political position of the administration has weakened somewhat and recent Constitutional Court policy reversals further underline the risks to SBA compliance, which constrain the rating,” according to the document.
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.
Fitch Ratings has affirmed Ukraine’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘. The Outlook is Stable, Fitch has said in a press release. In addition, Long-Term Foreign-Currency IDR affirmed at ‘B-‘; Outlook Stable; Long-Term Local-Currency IDR affirmed at ‘B-‘; Outlook Stable; Short-term foreign-currency IDR affirmed at ‘B’; and Short-term local-currency IDR affirmed at ‘B’. Country Ceiling affirmed at ‘B-‘.
Ukraine’s ratings balance weak external liquidity, a high public debt burden and structural weaknesses, in terms of a weak banking sector, institutional constraints and geopolitical and political risks, against improved policy credibility and consistency, the sovereign’s near-term manageable debt repayment profile and a track record of bilateral and multilateral support.
