S&P Global Ratings: risk of default in Russia is high

Russia's sovereign credit rating was downgraded by 8 points.  This was done by the international rating agency S&P Global Ratings (S&P) against the backdrop of sanctions imposed against Russia and Russian ones in response.  At present, the rating in both foreign and national currencies has been downgraded to CCC-.

The agency attributed the sharp drop in the rating to Russia's special operation in Ukraine and subsequent sanctions, including against the Central Bank. According to S&P, in the coming weeks, the Russian rating may again show a decrease, RBC reports.

The current situation also increases the risk of default in the country, as mentioned by the agency.

The credit rating is designed to demonstrate the state's ability to repay its loan obligations. Such ratings are compiled by specialized agencies, one of which is S&P. When determining which indicator to attribute a particular state to, a number of information is used. Among them there are the budget balance, total public debt and possible risks. Published ratings are used by investors who, on their basis, make a decision to purchase or refuse the government bonds.

Ratings below BBB-, which has now happened to Russia, are considered non-investment. This situation makes it difficult for companies to obtain loans in foreign markets. What is more, low rating can stop foreign businesses from entering the market not only because of the objective economic situation, but also because of the adopted corporate rules.