Fitch Ratings has confirmed Romania’s investment grade rating at the BBB- level for the long-term foreign debt and at BBB for the local currency debt. The outlooks are stable.

Romania currently has a healthier economic outlook and more favorable governance indicators than the 'BBB' range peers, according to Fitch. However, the fiscal loosening policy in 2016-2017 presents risks.

“The pro-cyclical nature of the new Fiscal Code poses risks to the medium-term fiscal sustainability,” reads the Fitch report.

The pressure on public expenditure will be increased by Romania's electoral calendar, with parliamentary elections due in late 2016.

In 2015, Romania recorded a fiscal deficit 1.2% of GDP and public debt ratio 39.4% of GDP. By comparison, in the other 'BBB' countries, the fiscal deficit reached on average 2.7% and public debt ratio 42.7% of GDP.

The total tax cuts, including the cut in the general VAT rate, will decrease government revenues by 2.0% of the GDP in 2016, according to Fitch estimates.

editor@romania-insider.com