"Does Standard & Poor's Monday announcement that it downgraded its rating on Russia's sovereign credit to junk status signal an impending economic disaster for Moscow? Probably not, although many analysts have warned that the announcement will only add to the nation's ongoing financial woes.
In its statement, S&P said the downgrade "reflects our view that Russia's monetary policy flexibility has become more limited and its economic growth prospects have weakened. We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy."
The downgrade also means Russia's sovereign credit rating is now at that same level as Turkey, Indonesia and Barbados. But the move was far from unexpected. Another of the Big Three rating agencies, Moody's, also downgraded Russia's debt rating this past October but left it one step above a junk rating.
And Alexander Kliment, director of Russia and emerging markets research at New York-based political risk analysis firm Eurasia Group, noted that Russia's stagnating economy was in trouble even before its current woes began.
Right now, he said, three factors are combining to create a ruinous economic "perfect storm" for Russia: the oil price collapse, the ruble's drop and Western sanctions over the ongoing crisis in Ukraine."
