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S & P affirmed Romania's rating to "BB +" with stable outlook


The country continues to display reasonable economic growth potential, but relatively low prosperity, rating agency analysts saying that the Government will continue to consolidate its public finances largely in line with the targets it has specified.

On the 7th of June, STANDARD & Poor's (S&P) Ratings Services affirmed its "BB+/B" foreign currency and "BBB-/A-3" local currency sovereign credit ratings on Romania, a press release informs. At the same time, S&P affirmed the "BBB+" transfer and convertibility assessment and the "3" foreign currency recovery rating. The outlooks on both the foreign and local currency ratings remain stable. The ratings on Romania balance S&P view of the country's substantial economic growth potential and moderate general Government debt against its limited administrative capacity, relatively low prosperity and high, if declining, levels of external debt.

"We expect the Romanian economy to stage a modest recovery in 2011 and strengthen steadily thereafter. In our view, growth will be muted in the short term owing to continued fiscal adjustment and household deleveraging, both of which will weigh on private consumption. External demand should, however, provide a positive boost to corporate investment and exports. We forecast that the current account deficit will narrow slightly in 2011 as domestic demand remains subdued, but widen thereafter as private consumption strengthens. That said, we believe it will remain well below historically high levels", S&P analysts note.

The stable outlook reflects S&P opinion that Romania's Government will continue to consolidate its public finances largely in line with specified targets, and that the new SBA - Small Business Administration - will minimize the risk of fiscal slippage ahead of the 2012 election. "We base our view on the assumption that the Government will maintain the SBA for its full two-year term and that the parents of Romanian banking subsidiaries will continue to rollover their cross-border advances. Foreign-owned subsidiaries control 85 pc of total banking sector assets. If, against our expectations, the Government fails to adhere to its fiscal consolidation and structural reform strategy, or should Romania's external deficits widen significantly without improving the country's long-term growth potential, the ratings could come under pressure", S&P stressed.

Conversely, if the Government maintains the momentum of its current structural reforms, building a sustained track record of fiscal prudence and maintaining stability in the financial sector, S&P could raise the ratings.

MOODY's intends to maintain Romania's rating for at least a year

The rating company MOODY's has no intention to modify its rating or outlook for Romania for at least a year, Petr VINS, the agency's Director General for Central Europe, stated on the 7th of June, Mediafax reports.

MOODY's is the only major rating agency which maintained Romania's rating in the "investment grade" category during the crisis.

"You mustn't forget we didn't downgrade Romania's rating during the crisis. The outlook is stable and we have no intention to modify it in the near future. We won't operate any modifications (e.n.: of the rating or outlook), at least in the year to come", VINS argued, in a seminar on credit risk management. He reiterated that, when a decision is made on a country's rating, the agency analyzes, ultimately, the macroeconomic indicators, including inflation, the unemployment rate and the level of public debt, as well as access to the international markets or a country's ability to pay its sovereign debt.

"Romania's future is bright, but not as bright as it appeared before the crisis, as economy will no longer grow at the same pace", VINS argued. MOODY's rates Romania's credit risk as "Baa3" (moderate credit risk), with a stable outlook.


Published on 08.06.2011




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