Uncertainty caused by sanctions doing economic damage in Russia
second rating agency in as many days to put Russia on warning that it may have its credit rating downgraded
MOSCOW—Fitch became the second rating agency in as many days to put Russia on warning that it may have its credit rating downgraded soon, as the country’s stocks took a pounding amid fears of the economic cost of the crisis in Crimea.
In a statement, Fitch said it has revised down its outlook for Russia’s debt to reflect the potential impact of sanctions on Russia’s economy, a day after Standard & Poor’s warned of a potential downgrade too. Fitch currently has a BBB rating on Russia. Lower ratings are important because it can make a country’s borrowing costs more expensive.
“Since U.S. 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.
The fears over Russia’s economic outlook have ratcheted up this week, after Russian President Vladimir Putin signed the treaty to annex Crimea following Sunday’s hastily called referendum which overwhelmingly supported that move. The West considers the vote illegitimate.
U.S. President Barack Obama on Thursday ordered economic sanctions against nearly two dozen members of Putin’s inner circle and a major Russian bank that provides them support.
Putin’s chief of staff was one of the 20 individuals sanctioned. Four influential businessmen who are believed to be Putin’s lifelong friends were also targeted.
The MICEX benchmark was down nearly 3 per cent an hour into Friday trading with the companies co-owned by the Russians sanctioned by the White House leading the decline. The Russian stock market has lost more 10 per cent this month, wiping out billions in market capitalization.