Fitch revises Ukraine's outlook to 'stable' from 'positive'

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Feb 4 (Reuters) - Ratings agency Fitch revised the outlook on Ukraine to 'stable' from 'positive' on Friday, citing the likelihood of a protracted period of tensions with Russia increasing the country's external financing risks, along with other factors.

The agency's base case is that a full-scale military conflict between the two countries will not happen, partly due to the likely cost and risks to Russia, the absence of firm domestic popular support for such an action and, to a lesser extent, the potential for some limited policy concessions.

"However, we expect a protracted period of elevated tensions and risk, and see a somewhat higher probability of more contained military operations such as in the Donbas region," Fitch noted.

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Russia has denied it plans to invade Ukraine but on Wednesday signaled it was in no mood for compromise. Moscow has deployed more than 100,000 troops near Ukraine's borders and says it could take unspecified military measures if its demands are not met. read more

Fitch added the increased risk of an invasion reflects the extended period of troop build-up along Ukraine's border, weak prospects for agreement on core demands of the Russian administration, and the heightened preparatory response by the United States.

The agency affirmed Ukraine's rating at 'B', citing a credible macroeconomic policy framework and a record of multilateral support and public debt below the 'B' median, among other factors.

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Reporting by Nishara Karuvalli Pathikkal in Bengaluru; Editing by Krishna Chandra Eluri

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