Loading ...The decision of the Fitch international ratings agency to downgrade Romania’s rating disregarded important developments in the Romanian economy, such as an annual rise of 9.1% in real terms of its Gross Domestic Product (GDP) and an estimated 6% rise in the GDP in 2009 and keeping Government debt at a relatively low level – just 10.6% of the GDP in June 2008, Romanian Minister of Economy and Finance Varujan Vosganian said on November 10 in a press release.
“The Ministry of Economy and Finance (MEF) has already warned that there is a lack of consistency at the level of political decision makers (Parliament, the President and political parties) in committing to a restrictive public policy that will secure the continuing growth of the Romanian economy.
On the other hand, the decision of Fitch disregarded important developments in the Romanian economy, such as an annual rise of 9.1% in real terms of its Gross Domestic Product (GDP) and an estimated 6% rise in the GDP in 2009 and keeping Government debt at a relatively low level – just 10.6% of the GDP in June 2008. Moreover, Romania has enough forex reserves (27.3 billion euros as of end-September) and an external debt burden that is lighter than that of other member states of the European Union,” reads the release issued by Vosganian.
Ratings agency Fitch lowered on November 10 the sovereign ratings on Romania by two notches, citing vulnerabilities in the emerging markets, spurred by the global crisis and the countries’ high current account deficits.
Thus, Romania’s long-term foreign currency IDR downgraded to ‘BB+’ Negative Outlook from ‘BBB’ Negative Outlook, the long-term local currency IDR downgraded to ‘BBB-’ (BBB minus) Negative Outlook from ‘BBB+’ Negative Outlook, the short-term foreign currency IDR downgraded to ‘B’ from ‘F3’, while the Country Ceiling downgraded to ‘BBB’ from ‘A-’ (A minus).
Thus, Romania’s long-term foreign currency IDR downgraded to ‘BB+’ Negative Outlook from ‘BBB’ Negative Outlook, the long-term local currency IDR downgraded to ‘BBB-’ (BBB minus) Negative Outlook from ‘BBB+’ Negative Outlook, the short-term foreign currency IDR downgraded to ‘B’ from ‘F3’, while the Country Ceiling downgraded to ‘BBB’ from ‘A-’ (A minus).
Romania’s two-notch downgrade reflects Fitch’s concerns about the macroeconomic policy framework in Romania and the country’s ability to deal with a severe economic and financial crisis.
Fitch highlighted the need to have a much stronger policy adjustment to avoid the currency crisis, on Romania’s current account seen at 14% of GDP in 2008 fuelled by excessive credit growth.
Fitch highlighted the need to have a much stronger policy adjustment to avoid the currency crisis, on Romania’s current account seen at 14% of GDP in 2008 fuelled by excessive credit growth.
Fitch also warned about the risks facing Romania’s economy as a result of an increase in private debt on external markets, which are increasingly shakier. It says that the political decision makers of Romania have ignored the alarms amidst the electoral campaigning for the November 30 general election, which has triggered negative consequences on fiscal policy cohesion.
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