Moody's Downgrades Russia to Junk Status -- 2nd Update

By Josh Beckerman 

Moody's Investors Service has 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.

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 grow 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.

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.

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