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Raiffeisen on: Fitch improves Romania's rating outlook to 'stable' from 'negative'

Yesterday, Fitch rating service improved Romania’s rating outlook to “stable” from “negative”. Fitch reaffirmed Romania’s long-term foreign currency rating at “BB+”.

Revision of outlook was determined by the calm down of political turbulences and the formation of a “working coalition”, by the adoption of the 2010 budget plan in line with the commitments to the IMF and the EC (targeting a deficit of only 5.9% of GDP), by the expected normalization of relations with the IMF and the EC whose technical missions recommended disbursement of additional tranches from the financial support package agreed in 2009, and by “sharper than expected” narrowing of the current account deficit which has reduced external funding needs.

Fitch considers that the approval of the budget plan for 2010 and the resumption of the funding programs with the IMF and the EC “has significantly reduced fiscal and external financing risks and the threat of further macroeconomic instability”. However, Fitch sees some downside risks related to the implementation of the policies contained in the 2010 budget (freeze of public wages and important lay-offs in public sector) due to the government’s narrow parliamentary majority and poor fiscal track record in 2007 and 2008.

We think that Fitch’s decision is positive news for investors, as it signals a decrease in the risks associated with the Romanian economy. However, we expect the decision to have no significant impact on the exchange rate and the interest rates as their current level included already the improvements mentioned by the rating agency. However, the decision offer grounds to our expectations to see more talks about an upward revision in country’s rating towards the end of this year.

Sursa: http://www.raiffeisen.ro

Tags: rsquo outlook rating fitch

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