Fitch revises Russia's outlook to negative, keeps rating at BBB

FXStreet (Łódź) - Fitch Ratings agency announced its decision on Friday to change the outlook on Russia's Long-term foreign and local currency Issuer Default Ratings (IDR) from stable to negative, maintaining the IDR at BBB. The action was prompted by concerns that the sanctions imposed on the country by the EU and the US could hurt its economy, as Russian growth has already slowed to 1.3% in 2013.

“Since US and EU banks and investors may well be reluctant to lend to Russia under the current circumstances, the economy may slow further and the private sector may require official support,” Fitch said in the official statement, cutting Russia's growth forecast  to less than 1% in 2014 and 2% in 2015.

“The direct impact of sanctions announced so far is minor, but the incorporation of Crimea into the Russian Federation will likely lead the EU and US to extend sanctions further in response. Furthermore, foreign investors may anticipate further official action and restrict Russian entities' access to external financing,” the agency argued.

“Risk premiums have already risen and syndicated loans to a number of large corporates are reported to be on hold. In a worst-case scenario, the US may prevent foreign financial institutions from doing business with Russian banks and corporates.”