KIEV, Dec. 16 - Moody's Investors Service has changed to negative from stable the outlooks on the B2 foreign and local-currency issuer ratings Kiev and Kharkiv, according to an agency report.

"The outlook change reflects the Ukrainian economy's limited recovery in 2011 and its likely deterioration going forward due to adverse global economic conditions. Taking into account Kiev's and Kharkiv's already weak operating balances and overall rigid budget structures, any material economic slowdown may lead to growing fiscal imbalances. The low shock-absorption capacity of the Ukrainian municipalities coupled with the weakness of the national banking system poses (re)financing risks in the short-to-medium term," reads the report.

Moody's notes that Kiev's credit profile also reflects foreign-currency risks unique to the city's debt, as around 64% of the city's direct debt is in eurobonds.