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Ukraine Upgraded by Moody's

November 11, 2003 | Bloomberg, Reuters

Ukraine's foreign credit ratings were raised by Moody's Investors Service on Monday, a month after the agency lifted Russia to investment grade.

Moody's increased Ukraine's rating by one level to B1, four levels below investment grade, from B2, the company said in a report from its New York office. Ukraine's rating is four rungs short of Russia's Baa3 rating, following Russia's two-level upgrade a month ago.

The improved rating means the country is still well within speculative grade territory, which restricts it to a narrow pool of potential investors.

"The Ukrainian economy has benefited from its trade, service, and investment links with the rapidly growing economy of the Russian Federation. Domestic political disagreements ... have not prevented the passage of important tax reforms that will provide further economic stimulus in the coming years," the agency said.

Moody's also raised the ceiling for foreign currency bank deposits to B2 from B3 and the rating for the government's local currency obligations to B1 from B2. It gave all the new ratings a stable outlook.

"This is not a big surprise, given Moody's upgraded Russia to investment grade a month or so back and Ukraine is seen as riding on the back of Russia's coattails," said Timothy Ash, emerging debt strategist at Bear Stearns in London.

Ukraine's economy is expanding by about 5.5 percent this year, its fourth successive year of growth, helped by rising demand from neighboring Russia, its biggest trading partner. Russia accounts for more than a fifth of the country's exports.

Ukraine's upgrade comes "on the heels of four years of strong economic growth and growing foreign currency reserves," Moody's said in its report.

The Russian economy, which is growing at a 6.2 percent rate, is expanding for a fifth year.

Russia's upgrade puts it level with the former Soviet republic of Kazakhstan and two above European Union candidate Bulgaria

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