By Alexander Kolyandr And Josh Beckerman
Russia's Finance Ministry Finance Minister Anton Siluanov said
Moody's Investors Service's downgrade of the country's debt rating
to junk status was primarily driven by political factors.
Earlier, Moody's downgraded Russia's sovereign debt rating to
junk status, citing the conflict in Ukraine, low oil prices and the
weakened ruble.
The rating was lowered to Ba1 from Baa 3.
Investors unloaded some rubles on the news of the downgrade,
lifting the dollar to a 0.6% gain against the Russian currency
during the North American session.
In an e-mailed statement, Mr. Siluanov said Moody's assessment
is "not only overly negative, but also based on an extremely
pessimistic outlook, which has no analogues today."
"The agency has ignored all the information provided to it about
the current state of the Russian economy, its budgetary and
financial policy, which has been provided to it," the minister
said, adding that Moody's based its decision primarily "on
political factors."
Moody's believes "the government's financial strength will
diminish materially as a result of fiscal pressures and the
continued erosion of" Russia's foreign exchange reserves due to
capital outflows and restricted access to international capital
markets.
Moody's also downgraded Russia in January, signaling a possible
further downgrade.
The rating firm said at the time that it expected Russia's real
gross domestic product to fall around 5.5% in 2015 and 3% in 2016,
bringing real growth over the 10-year period through 2018 to
"virtually zero."
Moody's continues to maintain a negative outlook for Russia.
The minister harshly criticized the decision and noted that the
agency based its outlook on the assumption of a $400 billion dollar
capital outflow in 2015 and 2016 as well as an 8.5% economy
contraction over the same period.
The Russian government expects its economy to contract 3% this
year, and while economists at private banks expect the fall to be
deeper, both the Kremlin and independent analysts expect the
economy to get on track in 2016.
"We reacted with surprise to their assessment," one government
official said. "We simply don't have so much money to leave the
country."
The official, who declined to be named, said both the government
and an international bank which consults it "were flabbergasted"
not only by the downgrade, but rather by the figures presented.
Standard & Poor's cut the country's credit rating to junk in
January, sending it below investment grade for the first time in
more than a decade. Also in January, Fitch Ratings cut its rating
to BBB-, the brink of junk.
According to an Interfax report, Russia's economy contracted
1.5% in January compared with the same period a year earlier.
Economic data published Wednesday showed Russia's economy moving
further toward recession under the weight of Western sanctions and
a sharp decline in the price for oil, its main source of hard
currency.
Write to Alexander Kolyandr at Alexander.Kolyandr@wsj.com and
Josh Beckerman at josh.beckerman@wsj.com
Corrections & Amplifications
Moody's said in January that it expected Russia's real gross
domestic product to fall around 5.5% in 2015 and 3% in 2016. An
earlier version of this story said the agency expected GDP to
grow.
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