Fitch: Russian companies will feel severe effect from U.S. sanctions

Fitch: Russian companies will feel severe effect from U.S. sanctions

The new round of U.S. sanctions against Russia will have a “severe effect” on targeted companies and will limit Russia’s potential economic growth, Fitch Ratings said on Friday, Reuters reported.

“The sanctions are likely to have a profound effect on the designated companies, which would be unable to transact in U.S. dollars - the standard denomination currency in commodities trading and the main currency in counterparty transactions in international trading,” Fitch said.

Fitch noted Russia’s strong external balance sheet, saying it means Russia is well positioned to meet forex needs from other parts of the economy, while the free-floating rouble provides a shock absorber, something that was not available in 2014.

“However, uncertainty stemming from the sanctions and their possible extension could deter investment and thereby undermine potential economic growth,” Fitch said.

This year, the economy is on track to grow by up to two percent, the central bank forecast, after expanding by 1.5 percent in 2017.

Fitch revised Russia’s sovereign rating outlook to positive from stable in September and said the rating itself would be one notch higher than its current BBB- level if not the U.S. sanctions.

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