By Maria Armental
Moody's Investors Service on Friday downgraded Russia's debt one
notch to Baa2, citing the country's fiscal uncertainty due to the
Ukraine crisis and the expanded international sanctions stemming
from that conflict.
The downgrade puts the country's rating two notches above junk
status--and brings Moody's rating in line with those of the other
two major ratings firms, Standard & Poor's and Fitch
Ratings.
Moody's outlook remains negative, which signals possible further
downgrades.
The military confrontation in neighboring Ukraine and escalating
sanctions against Russia are likely to have an increasingly
negative impact, the rating firm said. Consumer and investor
confidence have already taken a toll, it added, noting that it
expects real growth to decline by year's end and into at least
mid-2015.
"The longer the conflict in Ukraine and sanctions against Russia
last, the more significant will be the damage to investors'
confidence in Russia," the firm said.
Further, the country is already experiencing capital flight due
to international market access restrictions on Russian borrowers,
the firm noted, adding the Russian government and Russian-based
companies have been largely "shut out" of the international markets
since the second quarter.
The ratings agency added that the nation, a top crude and
natural gas producer, also is suffering from low oil prices and
depends on energy exports for about half of its federal budget
reserves.
Write to Maria Armental at maria.armental@wsj.com