Fitch affirms Ukraine's ratings, outlook stable.

By bne IntelliNews July 12, 2012
Fitch Ratings has affirmed Ukraine's Long-term foreign currency and local currency Issuer Default Ratings (IDRs) at B with a stable outlook. The agency also affirmed the Short-term IDR at B and the Country Ceiling at B. The agency pointed out finely controlled external financing situation. International reserves of the National Bank of Ukraine (NBU) were steady in Jan-April 2012 at around USD 31bn (or three months of current account payments) before posting falls in May and June, partly because of large external debt repayments. Pressure on reserves could re-emerge from Q3/12, reads the press release. Fitch expects the current account deficit to reach 6% of GDP in 2012, with the main stresses on the capital account. Ukraine's external liquidity ratio is one of the lowest among Fitch-rated sovereigns at a prospective 55% in 2012. Private sector external debt accounts for much of the debt service due, but on aggregate, rollover rates have been over 100% since the crisis. Ukraine's limited ability to refinance sovereign external debt obligations risks pressure on the exchange rate and a decline in reserves. Fitch expects real GDP growth to slow to 2.4% in 2012 but recover to 3.5% in 2013. Economic performance is dependent on the highly cyclical steel sector, and growth is sensitive to a downturn in the global economy or a eurozone growth shock. According to the press release, the Ukrainian government successfully narrowed the general government deficit to 4.2% of GDP in 2011 from 7.7% of GDP in 2010, but it will widen slightly in 2012. A supplementary budget in April 2012 lifted spending and may overestimate revenues, while losses at state-owned energy firm Naftogaz will increase.

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