S&P affirms Ukraine’s sovereign rating at B-/B, outlook stable

S&P affirmed its B-/B sovereign credit rating on Ukraine, and the outlook is stable. S&P assumed that Ukraine will comply with the terms of its USD3.9bn arrangement with the IMF, possibly with some delays, and that it will retain access to capital markets in order to meet its debt repayments through 2019. Beyond that, Ukraine is expected to negotiate another loan with the IMF. At the same time, S&P believes that cooperation with IFIs may be affected by the presidential and parliamentary polls this year, so a new IMF arrangement could be tougher for Ukraine. S&P believes that the risk of policy reversal is lower if the incumbent president, Petro Poroshenko, stays. We note that the chance of him staying after the runoff scheduled for Apr 21 is quite low, according to opinion polls. S&P assumed tensions with Russia to remain high, although it didn’t assume a further escalation.

S&P projects GDP growth of under 3% on average over 2019-2022, and by 2.5% this year in particular (largely unchanged from S&P’s forecast from last year), and domestic demand is expected to remain the main driver. We note that the WB and the IMF were more upbeat on GDP after this year in their forecasts earlier this month. S&P expects per capita income to return to the 2013 level of USD3,900 only in 2021. S&P estimated external debt obligations due in the remainder of this year, including interest, at some USD 3bn, and next year at USD5.5bn. Also, domestic FX-denominated debt repayments due this year are estimated at USD2bn.

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