MOODYS CUTS RUSSIA GOVT BOND RATING ONE NOTCH TO BAA3 FROM BAA2 (now lowest level of investment grade); remains on review for further downgrade
The key drivers behind the downgrade are:
1) Moody's expectation that the substantial oil price and exchange rate shock will further undermine the country's already subdued growth prospects over the medium term; and
2) Moody's nearer-term concerns over the negative impact on the government's financial strength of the erosion in official foreign exchange buffers and fiscal revenues.
In the review for further downgrade, Moody's will assess the resiliency of the government's balance sheet, in particular its foreign currency reserves cushion, to both the rating agency's baseline forecast for oil prices and to the risk of a further decline in oil prices at a time when international market access is restricted for Russian borrowers due to sanctions. The review will also focus on the efficacy of policy actions that the Russian central bank and fiscal policymakers may take to address the oil and exchange rate shock in an effort to preserve economic and government financial strength.