Romanian PM defends economic policies after Fitch, Moody’s maintain country’s ratings

Foto: INQUAM/Octav Ganea

Romania’s prime minister says reports from two international ratings agencies which have maintained the country’s ratings are “a great victory” for the government.

Premier Ludovic Orban said recent ratings from Moody’s and Fitch ratings agencies showed that “Romania is on the right road…. and the ratings are based on government policies, and responsibility of the budget.”

On Friday, Fitch on Friday maintained the rating for Romania’s foreign currency and local currency long-term debt at  ‘BBB-‘, with a negative outlook.

Moody’s deferred its final decision on Romania last week, citing uncertainty caused by the political outlook and health crisis.

Romania is scheduled to hold parliamentary elections on Dec. 6 and the Mr. Orban’s Liberal Party hopes to be able to form a majority in Parliament.

Romania’s ratings remain at the lower end of the range seen by investors as safe or low-risk – Baa3 – with a negative perspective, similar to other agencies.

Finance Minister Florin Citu said maintaining the same rate in the future depended very much on continuing responsible policies implemented by the government in 2020.”

Fitch said the negative outlook reflected weakening public finance metrics due to pro-cyclical policies in recent years and the coronavirus pandemic’s impact on economic and fiscal performance.

The rating is  supported by moderate government debt and debt service, GDP per capita, governance, and human development indicators above BBB category peers which are  balanced against larger budget and current account deficits and higher net external debt ratios compared with peers.

Fitch’s baseline scenario assumes that the outgoing Parliament, controlled by the opposition, won’t reinstate a 40% pension increase, which the president and government are likely to postpone.

Fitch notes that the ruling Liberal Government has pledged to focus on efficiency and targeted measures other than tax increases to reduce the deficit.

 Fitch estimates a 5% contraction of gross domestic product this year and an average growth of 4% in 2021-22, driven by a recovery in domestic and external demand.

The agency predicts a narrowing of the general government deficit to 6.8% in 2021 and 4.5% in 2022.


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