Russia credit rating cut amid Ukraine crisis

Russia felt the impact of the Ukrainian crisis on its economy today, when ratings agency Standard & Poor's cut its credit grade for the first time in five years and the central bank raised interest rates to keep the sliding currency from fuelling inflation.
S&P said in a statement it dropped Russia's rating to one level above "junk status" because the tense situation over Ukraine was causing investors to pull money out of the country.
Russia, it warned, "could see additional significant outflows of both domestic and foreign capital from the Russian economy." S&P said it is keeping a negative outlook, meaning it could downgrade the country again if economic conditions worsen.

Credit ratings are important for the economy because they determine how expensive it will be for a country or company to borrow on international markets and eventually determine how much consumers will be paying for their loans.
As Russia does not borrow much on international bond markets, the impact on its public financing costs is likely to be limited. Russia had 4.4 trillion rubles, or USD 123 billion, in outstanding government bonds as of April 1.
But the downgrade amounts to a warning on the risks of investing in the country and the low grade is surprising for a government that has very low levels of public debt.

Economic indicators have been pointing to problems in Russia's economy.
Investors spooked by the possibility of Western sanctions on Russia's economic interests pulled about USD 70 billion out of the country in the first three months of the year -- more than in all of 2013. Economic growth slowed to 0.8 per cent during that period, sharply worse than earlier forecast while. And the currency slumped, hitting records lows against the dollar.
Today, it was down 0.7 per cent at 36.03 rubles per dollar. The ruble's weakness, in turn, has been pushing inflation up in Russia as a lower currency makes imports more expensive.