Wednesday, February 25, 2009
latvia, ukraine downgraded
[Ukraine's] long-term foreign currency rating was lowered to CCC+, seven levels below investment grade, the rating company said in an e-mailed statement today, saying political turmoil poses growing risks to the country’s International Monetary Fund loan. ...
The hryvnia has lost more than 50 percent against the dollar in the past six months as reduced demand for exports and a lack of foreign credit causes Ukraine’s first economic contraction in a decade. The situation has been aggravated by a power struggle between President Viktor Yushchenko and Prime Minister Yulia Timoshenko, delaying decisions needed to revive the economy and putting the second installment of the IMF bailout at risk.
“Hopefully S&P’s move will concentrate minds in the cabinet of ministers, the presidential palace and the central bank,” said Timothy Ash, head of central Europe, Middle East and Africa research at Royal Bank of Scotland Group Plc in London, in an e- mailed note to clients.
Ukraine is not alone in its plight. East Europe as a whole will slide into a recession this year as demand for exports collapses, the IMF, which has also bailed out Latvia, Hungary, Serbia, and Belarus, said last month. The economies will shrink 0.4 percent, the IMF predicted.
Latvia’s credit rating was cut to junk by S&P yesterday, the second European Union nation to receive such a grade, because of a “worsening external outlook” triggered by the global crisis.
The Baltic state’s government collapsed this week, a month after street protests over the deteriorating state of the economy turned violent. Latvia’s economy shrank an annual 10.5 percent in the fourth quarter.
Fitch Ratings cut Ukraine’s ratings to B, the fifth-highest non-investment grade on Feb. 12 and kept the outlook “negative,” indicating they may fall further. Moody’s said yesterday it may cut Ukraine’s ratings within three months.
poland, meanwhile, is accelerating asset sales to boost public finances.