Ukraine’s financial health has deteriorated further due to the ongoing war with Russia. Due to the invasion of the Russians and the great loss of life, the refugee flows and the enormous damage to infrastructure, the country’s economy shrank 30 percent last year, analysts at Moody’s estimate.
This means that the risk of default by the Ukrainian government has further increased, according to the credit rating agency.
The score for Ukraine’s creditworthiness goes down one step at Moody’s to Ca, the second lowest level at this agency. That means it is very likely that the Eastern European country has already defaulted on its financial obligations or will soon be a defaulter. But looking ahead, experts at Moody’s think the situation will not get any worse because a deal with creditors is imminent.
Moody’s assumes that the war, which has been going on for almost a year now, will continue for a long time. This puts permanent pressure on public finances, despite the substantial international donations with which other countries support Ukraine in the fight against the Russians.
In addition, the rating agency refers to the destruction of much infrastructure, such as roads and electricity networks. Researchers at the Kyiv School of Economics estimated that damage had reached $138 billion in December or 70 percent of Ukraine’s gross domestic product (GDP).
This year the budget deficit was almost as large as 30 percent of the Ukrainian economy. Moody’s estimates that total debt is equivalent to 82 percent of GDP and will grow to 90 percent.
