Standard & Poor's has changed the outlook on its "B-" long-term foreign- and local currency ratings assigned to Ukraine to stable from negative, the agency said in a press release.
The outlook on the ratings was revised following the announcement of a financial support package from Russia. "In our view, Ukrainian external and fiscal funding challenges have been significantly reduced by the announcement of a financial support package from Russia," reads the press release. The stable outlook reflects S&P's view that the $15 billion (about 8% of 2014 GDP) in direct financing, which Russia announced on December 18, 2013, that it would provide to the Ukrainian government, should cover the government's external financing needs over the next 12 months. "With rollovers of trade financing and other private sector debt, we now expect Ukraine's foreign currency reserves to stabilize, further supported by an additional agreement to reduce by about 30% the price at which Naftogaz imports gas from Gazprom," reads the press release. The reduction in Ukraine's GDP in 2013, as before, is expected to reach 1%, but an assessment of economic dynamics in 2014 was worsened by 0.5 percentage points, to 1%, Standard & Poor's has said. "Under our base case, we do not expect Ukraine to commit to significant broad-based reforms. We expect little progress in areas, such as fiscal consolidation, creating a more-market-oriented domestic gas market, resolving nonperforming loans in the financial sector, or increasing exchange-rate flexibility," reads the press release. At the same time, according to the outlook, Ukraine's GDP growth was earlier expected at 3.5% in 2015 and 2016. According to updated estimates, the growth is expected at 2.5% and 3.5% respectively.