Standard & Poor’s changes its ratings towards Ukraine

31.03.2011

On March 31, 2011 international rating agency Standard & Poor’s (S&P) defined Ukraine’s sovereign rating. Thus, rating on liabilities in foreign currency remained at the level of B+/Stable/B, while rating on liabilities in national currency was assessed as BB-/Stable/B and national scale rating – as uaAA-. The main positive factors that influenced the Ukraine’s rating according to S&P were strong growth potential, location on the Eastern edge of the EU, significant natural resources and the substantial gross of foreign currency reserves. At the same time, the rating was negatively influenced by such factors as unsustainably high pension spending of 18% of GDP, political factors affecting the further budget consolidation, leveraged financial system, which suffers from high levels of impaired loans.

 

Among the key factors that holds constant the level of Ukraine’s ratings, are relatively moderate, even though growing, level of state debt, as well as perspectives for further economic growth. Stabilization of political situation in the country at the background of economical growth renewal contributes to the gradual resumption of both government access and access of private non-financial sector to the long-term external financing.

 

The outlook of rating agency at “Stable” level reflected the continued low level of state debt and significant human and natural recourses of the country, the Ukraine’s dependence on changes in the conditions of the foreign commerce and flows of capital, as well as the readiness of politics to restore financial stability.

 

Along with this, in April 2011, S&P confirmed long-term rating of Lvov at the level of CCC+ and changed outlook from “Negative” to “Stable”. Among positive factors which affected the city’s rating were low level of debt and expenses to its servicing and repayment and the importance of the city as one of commercial centers of western Ukraine, which has diversified economy. However, rising costs of Lvov by the need to improve the infrastructure of the city in view of the football matches within Euro-2012 decreases its financial flexibility.

 

Also, in April 2011 S&P increased the rating of Ivano-Frankovsk national scale rating from uaBBB- to uaBBB and confirmed its long-term rating “B-“. At the same time, “Stable” rating outlook improved to the level “Positive”, reflecting the increased possibility of the economy renewal and continued financial support of the city, improving its liquidity and continuing of conservative debt policy.