Fitch upgrades Romania to investment grade

The upgrade reflects Romania's progress in recovering from the effects of the financial crisis, evident in a return of GDP growth, a strong export performance, narrowing in the C/A deficit and reduction in its budget deficit, Fitch said.

The deficit of the consolidated state budget stood at 1.4% of GDP at the end of May, while the performance indicator agreed with the IMF for the entire year is 4.4% (cash standards). Budget revenues increased by 10.1% y/y boosted by higher VAT and excise revenues, while expenditures fell by 3.4% y/y due to last year's cut in public wages, inefficient social allowances and government subsidies. C/A deficit shrank by 46% y/y in January-April to EUR 1.2bn or the equivalent of 3.3% of GDP (annualized figure), FX reserves are at a very comfortable level of EUR 34.4bn and short-term private external debt is under control.

Market reaction: The RON appreciated to 4.192 after the release of the news.

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