11:24 31.03.2014

S&P expects Ukraine crisis will gradually de-escalate

2 min read
S&P expects Ukraine crisis will gradually de-escalate

The base-case scenario for the further relations between Russia, Ukraine and their international partners will be a trend for a gradual de-escalation of the crisis, reads a report of Standard & Poor's.

S&P said that there is a large likelihood that all conflict issues will be settled.

With the said scenario, Russia's GPD growth will moderately slow in 2014, to 1.2%, and in 2015 it will gaudily improve to 2.2%, S&P said.

S&P expects that the ruble will stabilize at the current lower levels, the capital outflow will slow to a modest pace and the inflation pressure will gradually weaken.

The escalation of geopolitical tension caused by recent events in Ukraine has shaken the markets and resulted in a larger outflow of capital from Russia.

Uncertainty over events in Russia and Ukraine and the international reaction to them inevitably lead to vagueness and unexpectedness, S&P said.

S&P said that crisis tensions could become more intense before coming to a resolution by late 2014, and this will increase the burden on the economy and financial system. Foreign investors could sell their Russian assets, an outflow of capital will be seen, and the Russian ruble will lose another 10% to the U.S. dollar. The assessment of Russia's GDP growth in 2014 under the said scenario is only 0.6%, S&P said.

The border between the two scenarios is extremely thin, and many factors could change the situation in one or the other direction.

With the additional sanctions that could be imposed by the United States and Europe, S&P do not expect that they will include large-scale trade sanctions against Russia or measures against its financial system. It is not anticipated that there will be interruptions of gas or oil supplies or a reduction in demand for energy.

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