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Fitch maintains Romania’s ratings at “BB+�/�BBB-“ with negative perspective

Fitch confirmed on Friday Romania's ratings for the long term debts in foreign currency and for those in local currency, at the level of "BB+"/"BBB-" with negative perspective, because the ratings are sustained by the funding programme agreed with IMF, Mediafax informs.

The country ceiling and the rating for the short term debts in foreign currency were maintained at the level of "BBB," respectively "B," reads a press release of the financial evaluation agency. "The economic adjustment programme established with the International Monetary Fund sustains Romania's ratings, but the ability of the authorities to observe the strictly necessary strategies will be essential," Andrew Colquhoun, director Sovereign Ratings Department, Fitch said..

Colquhoun showed that the prospects of the world economy have significantly worsened since Romania's ratings were revised downward, in November 2008, and this fact amplifies the risks with which Romania is confronted, in the conditions in which the economy adapts itself to the more reduced flow of capital in the private sector.

Romania's rating is further sustained by the solid public finances, by the social environment and the strong business environment, and the governance indicators, which benefit from the affiliation of the country to the European Union and fulfil the standards for a "BB" rating. The agency notes, however, that the economic and financial difficulties continue in the short term.

The adjustment programme agreed with IMF stipulates for 2009 a budgetary deficit of 5 per cent of GDP, which will require the adjustment of the budget by 3 per cent of GDP in the context of the recession.

The austerity measures could be accepted with difficulty by the population, in a year in which presidential elections will take place, the press release also shows. The gross governmental debts, of 22 per cent of GDP at the end of 2008, are under the average of 27 per cent necessary for the "BB" rating, but Fitch anticipates that the rate will rise towards this level in 2009-2010.

Fitch warns that a failure of the programme with IMF would have a strong negative impact on the ratings.

Romania is one of the states with the greatest exposure to the risks connected with the foreign funding, among the 11 states analyzed in May by Fitch in the report "External Financing Risks in Central and Eastern Europe."

A strong decline of the entries of net capital will conduct to the fall of the current account deficit, from 12.3 per cent of GDP in 2008. At the same time, the decline of the BNR reserves, big enough to undermine the confidence in the RON, would affect seriously the financial stability and the real economy, and would have a negative impact on the ratings.

On another hand, Romania remained in 2008 on the sixth position in a European top regarding attractiveness, based on the number of foreign direct investment projects, made by Ernst&Young consultancy company. Romania has attracted 145 foreign direct investment projects in 2008, down 3 per cent, from 150 in 2007. The weight of the projects attracted by Romania from the European total of 3,718, is 4 per cent.

 

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Tags: foreign which fitch negative ratings romania bnr

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