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Rating agencies: Romania is less prepared than its neighbours to face external risks

Romania is less prepared than other countries in the region to face the volatility of the international markets, given the high fiscal deficit, the weak economic structures and the rigidity on the labor force, said analysts of several rating agencies quoted by Curierul national daily.

'In some respects Romania is less well placed to face volatility than most of the countries in the region, given the fiscal deficit that reduces the maneuver area in case the economic growth slows down, and the weak economic structures, like the labor force rigidity,' Andrew Colquhoun, Fitch Ratings director, explained. He underscored an impact of the international financial markets' turbulences has already been felt on the leu, whose evolution became more correlated with the global markets. In his opinion, in case the conditions on the international markets become more difficult, the leu's volatility might increase, which will have negative consequences over Romania's macroeconomic stability. Colquhoun also said that there is also the risk that the international markets' volatility should affect the real European economy's perspective, the Romanian one included. This means that the Romanian banks' foreign shareholders might face more restrictive financing conditions, which will have an impact on the credit's expansion in the Romanian branches. The slowdown of loan extension can, however, have a positive aspect, too, from the viewpoint of the country rating, said Colquhoun. ‘'Of course, there's a risk of halting the extension of loans, but at present I do not think this is a real threat,'' said Fitch official. Analyst Marko Mrsnik at Standard&Poor's said the macroeconomic situation of Romania is perceived as having the biggest vulnerabilities in the region, and foreign downturns, alongside with inflationist pressures, stimulated by fiscal policies and expansionist incomes, point to risks of overheated economy and increase of the dependency of foreign financing, daily Evenimetul Zilei reports. ‘'The ever more stricter conditions for loan extending on international markets might lead to a moderate advance of loans, therefore it might contribute to the limitation of the domestic demand, especially if it is accompanied by adequate fiscal policies and revenues,'' said Mrsnik. According to Kenneth Orchard, analyst at Moody's Investors Service, the effects of the international crises can be felt by financial flows. ‘'The international banks are constrained by liquidity problems and they have adversity to risks. Over the past years there have been significant financial flows toward Romania and it is possible they decrease. As liquidity decreases in Romania, local banks will be forced to slow down the advance of loan extension, with the consumption and investments being affected,'' said Orchard. The representative of Moody's Investors Service said big commercial projects and real estate projects might be halted, provided the necessary funds are available. Sursa: http://www.rompress.ro

Tags: might international risks romania rating

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