The latest credit opinion carried out by Moody's on April 20, 2021, before the update on Romania's rating, scheduled for April 23, indicates a slight deterioration in the sovereign credit risk.

Even if the report does not rule out the possibility of changing the outlook from negative to stable, the risks listed by the credit rating agency are greater than the positive factors, Economica.net comments.

The strengths of credit risk are seen by Moody's as being the strong potential for medium-term economic growth, still moderate public debt burden, and favorable debt accessibility values, as well as Romania's EU membership - which gives it a political anchor. These are balanced against the weakened government balance sheet, as the increased internal political volatility and the increased risk of external vulnerability "weigh heavily."

In this context, the agency points out that a rating upgrade is unlikely in the near future, but it does not rule out the possibility of changing the outlook to stable, "should it be concluded that the government manages to stop and - in the medium term - reverse the structural deterioration of public finances."

In the medium term, structural fiscal consolidation supported by higher tax collection and a lower share of current expenditure would improve fiscal sustainability, the agency's statement reads.

Along with rebalancing towards higher investment spending, a steady reduction in the current account structural deficit and increased hedging through non-debt flows would also be positive for credit.

iulian@romania-insider.com

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