Fitch Ratings has affirmed Romania’s sovereign rating at “BBB minus” with a negative outlook, the latest note in the “investment grade” category (recommended for investment), according to a press release from the financial rating agency, cited by Agerpres.

Romania’s BBB-minus rating is supported by its membership in the European Union and capital flows from the EU that support investment and macro-stability, as well as GDP per capita, governance and human development indicators that exceed those of other countries that benefit from the Category Rating « BBB”.

What problems does Fitch see?

But they are balanced by budget deficits and current account deficits that are higher compared to other countries’ deficits, low levels of budget consolidation and high fiscal rigidity, as well as a relatively high net external debt position, Fitch estimates.

The negative outlook reflects the risks of a negative evolution caused by the war in Ukraine and the energy crisis in Europe for Romania’s economic, fiscal and external indicators, reinforced by much weaker growth prospects in the Eurozone and external financing conditions that are much stronger. more difficult than during the previous rating analysis in April.

These risks are compounded by competing policy objectives that underlie persistent macroeconomic imbalances.

The negative outlook also reflects continued uncertainty over the implementation of policies aimed at tackling structural fiscal imbalances over the medium term, despite progress this year, the financial rating agency said in a statement.

Cost growth began to accelerate

Fitch forecasts a narrowing of the budget deficit to 6.4% of GDP in 2022, broadly in line with budget targets, following good revenue performance.

Spending growth was more subdued after moderate increases in pensions and wages, but began to accelerate, leading to a negative impact on the prices of goods and services and additional support measures.

The agency expects a more challenging financial environment in 2023 amid slowing growth and demand for increased spending, which could reduce fiscal transparency. For now, energy support schemes, which include electricity and gas caps for households and to a lesser extent for businesses, are planned to be financed by exceptional taxes with a limited impact on the budget, but more direct support cannot be ruled out.

Fitch expects the deficit to narrow to 5.5% of GDP in 2023 and to 4.7% of GDP in 2024, particularly after a gradual improvement in revenue collection, in line with the fiscal reform approved in the second quarter of 2022 to reduce gaps and increase some taxes According to the financial assessment statement, reforms to the pension and wage schemes (which expire next year under the PNNR commitments) are essential to ensure fiscal stability in the medium term, as well as to continue EU financial support. agency.

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