International rating agency S&P Global Ratings has affirmed Uzbekistan’s long-term sovereign credit rating at “BB-” with “stable” outlook, the agency said in a statement.
The short-term credit rating was affirmed at “B”.
According to the agency, at the next stage of reforms implemented in Uzbekistan, the new tariff policy aimed at ensuring energy security and efficiency, and the reduction of budget subsidies deserve special attention.
S&P notes that the “Uzbekistan – 2030” strategy attracts investments in transport, telecommunications, agriculture, tourism and other sectors, reforms the energy sector, privatization and improvement of fiscal policy.
Thanks to investments in electricity and gas production, green energy and mining, as well as reforms aimed at creating a market economy, S&P forecasts Uzbekistan’s GDP growth to average above 5% per year in 2024-2027.
According to S&P estimates, gradual reduction of the budget deficit will be achieved starting from 2024 by increasing the targeting of subsidies and social spending and abolishing some tax exemptions.
The report also notes that the law “On State Debt” sets the upper limit of state debt and there are annual limits on newly attracted foreign debt.
According to the agency’s report, Uzbekistan’s sovereign credit rating may be upgraded and the outlook may be improved if reforms lead to higher-than-expected economic growth in the medium term and have a positive impact on the sector’s fiscal and external indicators.
Factors downgrading the country’s credit rating are the rapid growth of the country’s total external debt, increased fiscal and balance of payments risks due to failure to achieve the expected results of projects financed by external loans.
The international rating agency S&P Global Ratings has upgraded Turkey’s long-term foreign and local currency ratings to “B+” from “B”.
The ratings outlook is “positive,” according to a press release from S&P.
“We expect that following the municipal elections held in the country, the Turkish authorities will continue to fight inflation aggressively through tightening monetary policy and gradual fiscal consolidation,” the agency’s experts say.
S&P predicts a decline in Turkey’s current account deficit over the next two years, along with weakening inflation and slowing dollarization of the economy. At the same time, the agency’s analysts believe that the country’s inflation rate will remain double-digit until early 2028.
The Central Bank of Turkey is likely to keep the key interest rate at the current level of 50% until the end of 2024, according to S&P.
“We could upgrade Turkey’s rating again if the country’s balance of payments continues to improve, inflation slows, and domestic savings in Turkish lira increase, allowing the country to rebuild its foreign exchange reserves,” the agency said in a press release.
S&P may change the outlook on Turkey’s ratings to stable if pressure on the country’s financial stability or state budget increases, for example, if the lira’s depreciation fails to stop, or if the authorities abandon inflation control measures.
Earlier, Experts Club and Maksim Urakin released a detailed video analysis of how economic and political life is developing in Turkey, more detailed video analysis is available here – https://youtu.be/SUqOMFI5HbI?si=uEIZZOORj65VElUQ
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Ukraine’s economic growth will continue in 2024 on the back of expanding domestic demand and a further recovery in seaborne exports, but it will fall to 3.9% from around 5.5% last year due to the high base effect created by the past strong agricultural season, international rating agency S&P Global Ratings forecast.
“Absent a significant escalation of the war, we forecast Ukraine’s economy to grow by about 4-5% on average over the medium term, but a recovery to pre-war levels is unlikely in the foreseeable future,” it said in its release on Saturday night as it downgraded Ukraine’s long-term foreign currency rating to ‘CC’ from ‘CCC’ with a negative outlook amid an expected Eurobond restructuring.
S&P estimates that average annual inflation will fall to around 7% this year from 12.8% last year, but it will pick up in the second half of this year amid weakening base effect, recovering domestic demand and moderate currency depreciation.
The agency expects the hryvnia to depreciate to 41.02 UAH/$1 at the end of this year and to 43.89/$1 at the end of next year.
S&P emphasizes that the development of the war with Russia continues to shape Ukraine’s macroeconomic outlook. It is unclear how the war may evolve, but we believe a military stalemate without any major changes on the front lines remains the most likely scenario as both sides resign themselves to a protracted war. The prospect of any negotiated peace plan seems unlikely. As a result, we assume that the active phase of the war will last until the end of this year, and most likely beyond,” the document says.
The agency recalls that Russian troops have occupied about 15% of Ukraine’s territory, which accounts for about 8-9% of its pre-war GDP, 14% of industrial and 10% of agricultural production. Almost a third of Ukraine’s population has been displaced and about 15% have fled the country and are now refugees living mainly in the EU.
Nevertheless, according to S&P’s baseline scenario, the Ukrainian government and the NBU will maintain their administrative capacity even in the face of serious military attacks.
Given the significant damage to physical and human capital, Ukraine’s medium-term economic prospects are subject to a high degree of uncertainty, the agency notes. In its view, the key factors determining the country’s recovery prospects are the evolution of the war, post-war demographics and labor market profile, as well as the effectiveness of reconstruction efforts and continued international support.
S&P notes a high degree of uncertainty about the scope, outcome and consequences of the Russia-Ukraine war. In its view, regardless of the duration of hostilities, the associated risks are likely to persist for some time.
As reported, the National Bank of Ukraine in January estimated the country’s GDP growth in 2023 at 5.7% and maintained its 2024 growth forecast at 3.6%, slightly worsening it for 2025 – from 6.0% to 5.8%.
The government, when approving the draft state budget for the second reading in early November 2023, improved last year’s GDP growth estimate from 2.8% to 5%, but worsened it for 2024 from 5% to 4.6%.
S&P Global Ratings raised its foreign currency long- and short-term sovereign credit ratings on Ukraine to ‘CCC+/C’ from ‘SD/SD’ and the long-term issue rating on the restructured foreign currency bonds to ‘CCC+’ from ‘D’ on August 19.
“The rating action follows the completion of Ukraine’s eurobond restructuring,” S&P said in a press release on its website.
In addition, S&P said that the outlook on the long-term ratings is stable. The agency affirmed our local currency sovereign ratings at ‘CCC+/C’ and raised the national scale rating to ‘uaBB’ from ‘uaBB-‘.
“The stable outlook balances our view of the reduction in Ukraine’s government debt service requirements and our expectation of steady international financial support against risks to Ukraine’s economy, external balances, public finances, and financial stability stemming from the ongoing war,” S&P said.
Its experts said that As a result, Ukraine’s foreign-currency debt repayments have declined by roughly 40% over 2022-2024 to about $10 billion from $16 billion before the restructuring. Repayments now primarily comprise payments on official debt–mostly owed to the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development–and foreign-currency domestic-law bonds, held primarily domestically, including by state-owned banks.
“As a result, the near-term risks to the government’s liquidity position and, more broadly, its capacity to honor commercial debt, including in foreign currency, appear manageable,” S&P said.
At the same time, given the ongoing conflict with Russia, Ukraine’s ability to stay current on its debt is highly dependent on factors largely outside of government control.
The agency estimated Ukraine’s real GDP will contract by 40% in 2022 on the back of collapsing exports, consumption, and investment. “Given substantial damage to physical and human capital, Ukraine’s medium-term growth prospects are uncertain and hinge on regaining a level of territorial integrity and access to the Black Sea, alongside sizable reconstruction efforts,” S&P said.
In S&P latest projections, the 2022 fiscal deficit will be at least 20% of GDP, compared with 3.5% before the conflict.
The agency said that one of the key assumptions behind its rating is that donor fund disbursements, primarily from the United States and EU, will continue in the coming months. S&P added that although the timing and details of the new IMF program remain to be seen, if approved it could further ease government financing pressures, and support confidence and macroeconomic stability.
Regarding the hryvnia exchange rate, S&P expects hryvnia to weaken further, adding to inflationary pressures. Speaking of the quality of banks’ assets, it said the outlook for them challenging, despite Ukraine’s banking system entered the war with adequate liquidity and capital buffers.
S&P added that it could lower the ratings in the next 12 months should the security outlook deteriorate, putting further pressure on Ukraine’s foreign exchange reserve position or the government’s administrative capacity, or resulting in much higher government gross financing needs than we currently anticipate. Absent an escalation of the conflict, material delays in foreign donor support could also lead to a downgrade, S&P said.
“We could raise the ratings if Ukraine’s security environment and medium-term economic outlook significantly improve,” S&P said, describing another scenario.
Fitch Ratings has upgraded Ukrainian integrated steel company Metinvest B.V.’s (Metinvest) Long-Term Local- and Foreign-Currency Issuer Default Ratings (IDRs) and senior unsecured bonds to ‘BB-‘ from ‘B+’. The Outlook is Stable.
“The upgrade follows Ukraine’s Country Ceiling upgrade to ‘B’ from ‘B-‘on 6 September 2019. The IDR of Metinvest remains two notches above the Country Ceiling,” Fitch said in a report.
Fitch said that this happened due to its comfortable hard-currency (HC) external debt service coverage, and also its ‘BB’ category business and financial profiles.
In addition, S&P Global Ratings raised Metinvest’s issuer credit rating and its issue ratings on the existing notes to ‘B’ from ‘B-‘. The Outlook is Stable.
S&P said that the Ukrainian steel maker Metinvest has built a track record of balanced financial policy in the past 18 months, with relatively low gearing and positive free cash flow, supporting an adequate spending between growth and shareholder returns.
The two agencies also assigned preliminary ratings to senior unsecured notes of at least $500 million proposed by Metinvest to issue at once after purchase for cash up to $440 million notes in circulation: Fitch – ‘BB-(EXP),’ and S&P – ‘B.’
“The proposed senior unsecured notes of at least $500 million will smooth the maturity profile and strengthen liquidity,” S&P said.
Fitch expects Metinvest’s HC external debt service cover ratio to be comfortable at above our 1.5x threshold on a 18-month rolling basis, allowing the company’s IDR to remain two notches above Ukraine’s ‘B’ Country Ceiling . The top line of the ratio is mainly comprises substantial export EBITDA, aided by abroad EBITDA and cash. The bottom line of the ratio represents HC debt service, comprising principal repayments and interest payments, which are fairly smooth over 2019-2022. The company faces a $945 million notes maturity in 2023 but this would be addressed by the upcoming notes issue, which will improve HC external debt service coverage for 2023.
Fitch said that since the last rating action in April 2019 we have revised Metinvest’s full-year EBITDA down to slightly above $1.5 billion in both 2019 and 2020 and slightly under $1.5 billion in 2021 and 2022, reflecting sharper-than-previously expected price contraction across the steel value chain.
Fitch said that Metinvest is an important eastern European producer of metal products (8.8 million tonnes in 2018) and iron ore (27.3 million tonnes of concentrate and pellets in 2018), with around 300% self-sufficiency in iron ore but only 40%-45% in coking coal.
“The steel segment’s proximity to Black Sea and Azov Sea ports allows the company to benefit from both cheaper steel exports and seaborne coal imports logistics. The operations are also further integrated into downstream operations in Italy, Bulgaria and the UK. Partial integration into key raw materials and exposure to high value-added products help Metinvest mitigate but not avert steel market volatility,” Fitch said.
Fitch said that the conflict in eastern Ukraine continues to pose risks to day-to-day operations. Metinvest’s exposure to the risks of conflict escalation remains high relative to its EMEA peers, although Fitch admitted that most of its 1H19 EBITDA is generated by its mining assets located substantially farther from the conflict zone.
S&P expects that the company will maintain an adjusted funds from operations (FFO) to debt of 35%-40% in 2019 and 2020, well in the range commensurate with the current ‘B’ rating (20%-40%), with a positive discretionary cash flow (free cash flow after capex and dividends).
“We believe that the current market conditions will have a mixed impact on the company’s results in 2019,” S&P said.
“We expect Metinvest to benefit from the abnormal iron ore and pellet prices. Under our calculations, the EBITDA would need to fall to about $1.1 billion in 2020, compared with $1.5 billion-$1.7 billion in our base case, before witnessing a pressure on the rating,” S&P said.
S&P Global Ratings has raised its long-term national scale ratings on Ukraine to ‘uaBBB’ from ‘uaBBB-‘ and removed the UCO designation from the ratings.
“Our global scale issuer and issue credit ratings on Ukraine are not affected by today’s rating action,” S&P said.
On April 20, 2018, S&P Global Ratings affirmed its ‘B-/B’ long- and short-termforeign and local currency sovereign credit ratings on Ukraine. The outlook is stable.
According to the report, the next scheduled rating publication on Ukraine will be on Oct. 19, 2018.
S&P recalled that National scale ratings express its opinion of the creditworthiness of an issuer or a debt instrument relative to other issuers and issues in a given country. The purpose is to provide a rank-ordering of credit risk within the country.
