Fitch affirms Ukraine’s rating and updates GDP forecast
The international rating agency Fitch Ratings has affirmed Ukraine’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at CC.
This is stated in the message of Fitch Ratings.
The affirmation of Ukraine’s foreign currency IDRs at CC reflects Fitch’s expectations for further restructuring of commercial debt before the end of the two-year break in Eurobond payments in September 2024, Fitch said in a statement.
External debt servicing will increase to $7.6 billion in 2025, with a large budget deficit in the medium term increasing the already high public debt. The authorities will probably prefer to conduct a single comprehensive debt restructuring next year.
The local currency IDRs of CCC- have also been affirmed. The higher rating compared to the foreign currency debt reflects a significant lack of incentives to restructure the local currency debt.
Only 4% is held by non-residents, with 48% owned by the National Bank of Ukraine and 38% by the domestic banking sector, half of which is state-owned.
Fitch noted that it sees no international pressure to restructure the domestic debt, in particular because of the risks to domestic demand for government debt and confidence in banks.
Ukraine’s GDP is projected to grow by 3.5% in 2023 and 4% in 2024, after contracting by 29% in 2022.
Fitch believes that the $14 billion in emergency recovery spending planned for this year will not be fully implemented.
Fitch expects the fiscal deficit to rise to 17.3% of GDP this year from almost 16% of GDP.
