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S&P: Romania's budget deficit will be 5% of GDP this year

Romania's budget deficit will be this year 5% of GDPas compared to the government target of 2% of GDP, but the level depends on the fiscal measures to be adopted and the moment of their application, Marko Mrsnik, from Standard & Poor's rating agency said on Tuesday.

He explained that the fact that incomes will drop and expenses will be restricted should be taken into account. If not the deficit could be very high. However, he did not want to comment on the government initiatives on the budget. The analyst pointed out the need for policies oriented toward macroeconomic stability.

Mrsnik explained that Romania has at present a rating with negative perspective, which reflects the possibility of drawbacks in case foreign financing stops suddenly. On 27 October 2008 S&P dropped by a level Romania;s ratings for currency loans from BBB-/A-3 to BB+/B and for the credits in lei on the long run to BBB- getting Romania out of the category of states with ratings on the investment grade category granted by the agency. The movement of the rating agency was followed in November by a similar one from Fitch, so that Romania has ratings in the investment grade category only from Moody's."Romania is vulnerable to a sudden financing stop which needs drastic economic adjustment. Romania's credit rating could be supported by foreign financial conditions, a better rule, a more coherent policy mixture after last year's elections. Risks are dropping but there are factors which support this situation," Mrsnik said.

As for macroeconomic indicators of 2009, the analyst is counting on a growth of Romanian economy by 1-2%. Although there might not be recession, technically speaking it could be felt like a recession, he explained. "Agriculture is a sector which may not be very affected. The most affected are sectors concerning exports, because foreign demand I considerably dropping and the liquidity shortage can be felt, " the S&P analyst considers. Inflation will not be a very big problem, despite the depreciation of the leu and the foreign deficit will be compressed as an effect of the dropping demand, the analyst estimates. In the banking sector there could be problems concerning un-performing credits.

"The deterioration of the quality of active stock is alarming because banks are now under pressure for not having sufficient financing from mother banks. That is a risk and we can already see a slowing down of crediting and a restriction of credit conditions," he mentioned.

 

Sursa: http://www.actmedia.eu

Tags: romania deficit budget romanias

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