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Standard & Poor's affirms ratings on Romania, outlook stable

Standard & Poor's Ratings Services on Wednesday affirmed its 'BB+/B' foreign currency and 'BBB-/A-3' local currency sovereign credit ratings on Romania.

At the same time, it 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 agency reports in a press release issued on Wednesday.

'The ratings on Romania balance our 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,' says Standard & Poor's.

The agency expects the Romanian economy to stage a modest recovery in 2011 and strengthen steadily thereafter. In its 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. Standard & Poor's also forecasts 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.'

The stable outlook reflects Standard &Poor's view that Romania's government will continue to consolidate its public finances largely in line with specified targets, and that the new stand-by arrangement will minimize the risk of fiscal slippage ahead of the 2012 election. The agency's view is based 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% 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,' Standard & Poor's warns, adding that '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, we could raise the ratings.'

In Standard & Poor's parlour, 'BB+' is considered highest speculative grade by market participants and it is the first in the junk category. Standard & Poor's downgraded Romania from investment grade in 2008. The Fitch rating agency also gives Romania a 'BB+'.

Moody's is the only credit rating agency to give Romania an investment grade rating. Moody's Central Europe General Manager Petr Vins said on Wednesday in Bucharest that Moody's does not intend to modify its 'BAA3' rating on Romania for at least one year.

Sursa: http://www.actmedia.eu

Tags: standard ratings romania poors government stable rating

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