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Fitch Cuts Russia's Credit Rating To One Step Above Junk

A board showing currency-exchange rates is on display in a street, with a church reflected in a shop window in Moscow on January 6.
A board showing currency-exchange rates is on display in a street, with a church reflected in a shop window in Moscow on January 6.

Fitch Ratings has cut Russia's credit rating to the lowest investment grade after plunging oil prices and the Ukraine conflict triggered the worst currency crisis since 1998.

The international ratings agency announced on January 9 it had lowered its rating for Russian government debt to BBB-, just one notch above junk level.

The rating company added a negative outlook on the rating, saying, "The economic outlook has deteriorated significantly since mid-2014 following sharp falls in the oil price and the ruble, coupled with a steep rise in interest rates."

Interfax news agency quoted an unidentified Russian government expert as describing Fitch's decision as "politically biased" and "absolutely economically ungrounded."

Standard & Poor's cut Russia's credit rating to BBB- in April. Last month, S&P put the country on negative credit watch and said it expects to conclude its review by mid-January.

Russia, which is the world's biggest energy exporter, is on the brink of a recession after crude prices fell more than 50 percent since June and the United States and European Union imposed sanctions following Russia's annexation of Crimea in March 2014.

Fitch said the sanctions "continue to weigh on the economy by blocking Russian banks' and corporates' access to external capital markets."

The penalties have also curbed investor appetite for the ruble, stocks, and bonds.

Fitch said that had forced it to cut its forecast for the Russian economy this year to a 4 percent contraction, compared with its previous forecast of a 1.5 percent contraction and growth of 0.6 percent in 2014.

"Growth may not return until 2017," the agency warned.

On the other hand, Fitch said the government still merited an investment-grade rating because it had a low level of debt and solid foreign assets.

But the longer sanctions remain in place, it added, these positive attributes could be eroded.

Last month, the central bank estimated that the Russian economy may contract as much as 4.7 percent next year, the most since 2009, if oil averages $60 a barrel.

It also said capital flight from the country may amount to $134 billion in 2014.

According to the Bloomberg financial news service, the ruble was the world's second-worst-performing currency in 2014 after Ukraine's hryvnya.

Authorities have responded to the sharp fall of the Russian currency with emergency measures.

Russia's central bank has raised its key rate six times since March and spent $88 billion supporting the ruble last year.

The government also instructed the country's biggest state-controlled exporters to convert more of their foreign revenue into the local currency and announced plans to inject as much as 1 trillion rubles ($17 billion) of capital into banks using domestic bonds.

With reporting by AFP,, and Interfax