(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Russia Slowdown Hits CIS Sovereigns www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863270">http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863270 LONDON, March 05 (Fitch) The sharp slowdown in Russia's economy is a significant shock for the economies of other sovereigns in the Commonwealth of Independent States (CIS) region, but the impact on these countries' credit profiles varies considerably, Fitch Ratings says. Armenia and Ukraine have the most direct exposure among Fitch-rated sovereigns, while the steep fall in oil prices has magnified the fallout in Kazakhstan and Azerbaijan. The Russian economic contraction has a direct impact on CIS countries with close economic links through trade, remittances, and investment flows. Indirectly, the sharp fall in the rouble has been a major factor in significant currency adjustments across the region. Russia is Armenia's leading export market and largest source of foreign direct investment and remittances. Russia's slowdown will therefore have a major impact on Armenia's growth prospects, as reflected in our one-notch downgrade of the latter to 'B+' in January. The disruption of traditionally close economic ties with Russia has been a significant contributor to Ukraine's sharp economic contraction. Ukraine is the second most exposed Fitch-rated CIS sovereign even excluding the impact of the current conflict and trade restrictions. Georgia is less exposed to Russia via remittances and trade ties, although we are still likely to slightly revise down our GDP growth projections for 2015-2016. Both Armenia and Georgia have allowed their currencies to float, providing a shock absorber and preserving foreign-exchange reserves.
Direct Russian exposure relative to GDP is lower in Kazakhstan and Azerbaijan, but the impact of the rouble's depreciation on their fixed currencies is a major indirect channel of contagion - particularly in a context of lower oil prices. Azerbaijan has responded by devaluing the manat and shifting from a US dollar peg to a euro/dollar basket. We believe there is a high possibility Kazakhstan could also devalue, as the tenge's real effective exchange rate has appreciated to levels last seen before the February 2014 adjustment. Devaluation poses risks for both sovereigns, but they have strong buffers. Our full report, "Russia Slowdown Hits CIS Sovereigns", is available to subscribers at www.fitchratings.com or by clicking the link above. Contact: Paul Rawkins Senior Director Sovereigns +44 20 3530 1046 Fitch Ratings Ltd 30 North Colonnade London E14 5GN Aidan Manktelow Director Sovereigns +44 20 3530 1752 Vincent Forest Associate Director Sovereigns +44 20 3530 1080 Mark Brown Senior Director Fitch Wire +44 20 3530 1588 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.