S&P downgrades Russia to ′junk′ territory | Business | Economy and finance news from a German perspective | DW | 26.01.2015

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S&P downgrades Russia to 'junk' territory

US ratings agency Standard & Poor's has downgraded Russia to a level just below investment-grade. The agency said its decision was based on the assessment that the nation's growth prospects had weakened.

Ratings agency S&P reported Monday it had cut Russia's sovereign credit rate to just below investment grade.

The downgrade from BBB- to BB+ marked the first time in 10 years that Russian debt was considered to have reached so-called junk status.

Analysts said Standard & Poor's move could not only harm the nation's image among investors, but could also push up borrowing costs, with capital and pension funds needing to adhere to rules that would prevent them from buying anything below investment grade.

Dependence on oil revenue a curse

"The downgrade reflects our view that Russia's monetary policy flexibility has become more limited and its economic prospects have weakened," the ratings agency said in a statement.

Russia under pressure

S&P warned as early as December of last year that it could deprive the country of its BBB- rating, following a rapid deterioration of its fiscal buffers.

Russia's economy is expected to slide into recession in 2015 as Western sanctions over Ukraine keep spurring capital flight and inflation. In addition, the enduring slump in oil prices has sharply decreased Russia's export revenues.

hg/bk (Reuters, AFP, AP)