In class we talked about how Greece, for instance, affected the economic situation of the United States. What is your opinion about Russia’s situation? Do you think it will impact the US? In what way? to what extend? Was the move from the S&P a political motivated decision?
Here is part of the article:
“S&P downgraded Russia's rating to 'BBB-' from ‘BBB'.
Also on Friday, Russia's central bank raised its key interest rate from 7% to 7.5% as it sought to defend the value of the rouble.
Announcing the downgrade, S&P said: "In our view, the tense geopolitical situation between Russia and Ukraine could see additional significant outflows of both foreign and domestic capital from the Russian economy.
Investors have been pulling money out of Russia since last year when the country's economy ran into trouble, but this process has intensified in recent weeks amid concerns over Ukraine.
In the first three months of this year, foreign investors have withdrawn $63.7bn (£37bn) from Russia, and economic growth has slowed significantly - it is expected to grow at no more than 0.5% during 2014.
Russia's central bank said its rate rise was because of a higher inflation risk and the weakness of the rouble. The Russian currency has lost nearly 8% against the dollar this year.
The bank said its move would enable it to lower inflation to 6% by the end of 2014 and added it did not plan on cutting rates in coming months.
Russia's Economy Minister Alexei Ulyukayev dismissed S&P's move, saying that "partially, it is kind of a politically motivated decision”.
Full article at: http://www.bbc.com/news/business-27159423
This does not honestly surprise me that much. Given the situation that is unfolding in the Ukraine, investors in all markets have been growing wary I think (just look at the recent selloffs in the past few weeks). I remember earlier when the Ukraine situation was just heating up, the Moscow stock exchange fell about 10% in one day. It'll be interesting to see how the whole military conflict pans out.
ReplyDeleteS&P is US based so its rating reflects more or less the US political attitude towards Russia. I just talk to an alumna specializing in crisis management today and it appears that what appears in the news depends on the relationship between you and the reporters. Likewise, what S&P does may reflect the US govt's attitude. Good question, I do not have a clear idea of how Russian economy would affect the US and the world.
ReplyDeleteI think the Russian economy would have a great impact on the US economy because the US relies on Russia as their biggest energy source and as we all know most industries in the US have high energy needs. Since the situation in Russia doesn't seem so good right now, i think downgrading the rating is a good idea to show that investing in Russia at the moment might not be such a good idea. And, as Ly said it is how S&P views the situation not the government, so it is purely economical not really political.
ReplyDelete