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Fitch says Romania rating on hold for now

Romania has made progress enforcing IMF-backed reforms over the last year but still faces risks to fiscal consolidation which will keep its sovereign rating below investment level for now, Fitch Ratings said.

'At the moment, while things are improving there are still significant risks to the downside,' Douglas Renwick, director of EMEA Sovereigns at Fitch Ratings, told Reuters on Tuesday.

The coalition government has kept its 20 billion euros aid deal led by the International Monetary Fund on track, enforcing harsh measures like wage cuts and a value added tax hike, shoring up its public finances and restoring market confidence.

With the government on a more stable footing and a new precautionary aid package under way, the Romanian economy was expected to turn to growth this year, which could help its ratings.

Fitch and Standard & Poor's cut Romania's ratings to junk status at the height of a political crisis that put its IMF-deal temporarily on hold in late 2009, but both have since changed their outlook to Stable from Negative.

'The main risk is that fiscal consolidation won't happen as quickly as planned,' Renwick said by phone.Other risks included a potential slowdown in policy reform and Romania's external finances, Renwick said.'This is part of the reason for Romania's rating remaining at sub-investment grade.'

Fitch and Standard & Poor's rate Romania at 'BB+', while Moody's rates it above junk at 'Baa3' with a Stable outlook.

A new two-year deal with the IMF should help hold Bucharest to its promise to cut the budget gap to 3 percent of gross domestic product by 2012, soothing concerns that one of Europe's hardest hit states could slide back on reforms.Renwick said Romania's fractious domestic politics -- the government has survived five no-confidence votes in the last year -- were within the tolerance of its rating and did not pose a threat.'Regarding future rating actions, the outlook is on Stable and we will look to see how things develop this year.'

Sursa: http://www.actmedia.eu

Tags: fitch rating romania

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