Moody’s revises Ukraine outlook to positive

Moody’s Investors Service said it changed the outlook on the government of Ukraine’s ratings to positive from stable. Moody’s also affirmed Ukraine’s long-term issuer and senior unsecured ratings at Caa1, and the Ca rating on the $3 billion eurobond the country sold in 2013.

The agency cited two reasons behind the outlook change. The first was the country’s rebuilding of its foreign exchange reserves and the second was improving macroeconomic stability.

“Moody’s expects foreign-exchange reserves to remain close to their current levels of around $21.4bn (around 16% of end-2018 GDP), equivalent to more than 3 months of imports, which is significantly in excess of Moody’s previous expectation, set at the time of the last rating action in December 2018. As a result, Ukraine’s external vulnerability indicator, Moody’s measure of reserve adequacy, is expected to fall to 211% in 2020 compared to our previous forecast of 354%,” said Moody’s in a press release.

In terms of macroeconomic stability, inflation is closer to the central bank’s target, which enabled the bank to gradually ease up.

“The economy has been growing for 15 consecutive quarters with the prospect for the very sharp pick-up in economic sentiment indicators in recent months to help support higher levels of investment which still remain lackluster relative to the country’s needs. At the same time, the fiscal position remains prudent, with the general government debt burden expected to decline to around 54% of GDP by the end of next year, and will be supported by ongoing modest deficits with a target 2.1% of GDP outlined in the 2020 budget,” Moody’s said.

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