Fitch affirmed Ukraine’s IDR at B- with a stable outlook. Fitch said Ukraine’s ratings are based on weak external liquidity, high external financing needs, weak banks, institutional constraints and political risks on the one hand; and improved policy credibility, improving macroeconomic stability, declining debt, and bilateral and multilateral support on the other hand. In particular, said Fitch, Ukraine’s continued engagement with the IMF eased financing constraints and supported international reserves.
Fitch estimated external financing needs at 72% of international reserves this year and 90% next year. External debt amortization is to grow to USD4.3bn this year from USD3bn last year, said Fitch. Average inflation is expected by Fitch to decline further to 8.6% this year and 6.2% next year. General government deficit is expected to inch up to 2.3% of GDP this year from an estimated 2.2% last year. CA deficit is expected by Fitch to grow to 3.5% this year from an estimated 3.4% last year, and then to widen to 3.7% in 2020. GDP growth is expected by Fitch to slow to 2.6% this year from 3.2% last year. Regarding the upcoming March 31 election, Fitch believes that the incoming president will have ‘limited space in the near term’ to change the economic policy or abandon commitments to the IMF.
For comparison, Moody’s last December upgraded Ukraine’s bond ratings to Caa1 from Caa2 and changed the outlook to stable from positive. Last October, S&P affirmed its B-/B sovereign rating, and the outlook was also stable.