News ID: 704
Published: 0418 GMT August 23, 2014

Ukraine rating cut by Fitch

Ukraine’s credit rating was cut by Fitch Ratings, which cited a worsening economic outlook as the military conflict with pro-Russian separatists in the nation’s east curbs business activity.

The company lowered its assessment to CCC from B-, which signals a high risk of default. Only Argentina, which failed to make an interest payment last month, is rated lower than Ukraine among 104 countries Fitch tracks, Bloomberg wrote.

While the government has recaptured territory from the rebels, conflict may persist or intensify, delaying economic revival and damaging productive assets, Fitch wrote in a statement.

Ukraine and its allies say the war is being fueled by Russian support for the insurgents, which President Vladimir Putin has denied.

“It’s an indication that the quality of debt has deteriorated,” Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Managementin Birmingham, Alabama, said by phone.

“It’s not a predictor; it rather reflects the current situation in the country as the economy declines and the currency devaluates.”

Ukraine’s economy has been rocked by Russia’s annexation of Crimea and pro-Russian separatist attacks in the nation’s eastern industrial heartland. The government sealed a $17 billion loan from the International Monetary Fund to stave off bankruptcy and received the first tranche in May.

The hryvnia has lost 39 percent against the dollar this year, data compiled by Bloomberg show.

The eastern European nation’s government predicts the economy will shrink 6 percent this year. It needs more financing than the IMF program envisages and will hold a donor conference in September, Finance Minister Oleksandr Shlapak said this week.

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