Russia`s Economy is heading towards Deep Recession | Moody`s

Moody`s said Govt. has not taken enough steps to counter problems of Russian Economy

Moody's has cut its rating on Russia to "junk," and says Russia's economy is headed for a "deep" recession in 2015.

New York, February 20, 2015 -- Moody's Investors Service has today downgraded the government of Russia's sovereign debt rating to Ba1/Not Prime (NP) from Baa3/Prime-3 (P-3). The rating outlook is negative. This rating action concludes the review for downgrade that commenced on January 16, 2015.

Explaining further, Moody's said in a statement that, following major factor were taken into account while downgrading of Russia's government bond rating to Ba1 from Baa3 / Prime-3 ( P-3).

1. The continuing crisis in Ukraine and the recent oil price and exchange rate shocks will further undermine Russia's economic strength and medium-term growth prospects, despite the fiscal and monetary policy responses.
2. The government's financial strength will diminish materially as a result of fiscal pressures and the continued erosion of Russia's foreign exchange (FX) reserves in light of ongoing capital outflows and restricted access to international capital markets;
3. The risk is rising, although still very low, that the international response to the military conflict in Ukraine triggers a decision by the Russian authorities that directly or indirectly undermines timely payments on external debt service.
4. The assignment of the negative outlook reflects the potential for more severe political or economic shocks to emerge, related either to the military conflict in Ukraine or a renewed decline in oil prices, which would further impair Russia's public and external finances.

While justify the this decision of lowering Country Ceilings for debt in Local Currency, Moody carried on saying that,

 " the Decision of  lowering Russia's country ceilings for foreign currency debt to Ba1/NP from Baa3/P-3; its country ceilings for local currency debt and deposits to Baa3 from Baa2; and its country ceiling for foreign currency bank deposits to Ba2/NP from Ba1/NP." 

A country ceiling generally indicates the highest rating level that any issuer domiciled in that country can attain for instruments of that type and currency denomination.