Fitch affirms Romania's BBB- rating with stable outlook, predicts public debt will peak in 2015, then fall

Ratings agency Fitch has confirmed Romania's BBB- rating with a stable outlook. The Fitch London branch yesterday (April 18 ) “affirmed Romania's Long-term foreign currency Issuer Default Rating (IDR) at BBB-, and its long-term local currency IDR at BBB,” with a stable outlook on both ratings. At the same time, Fitch affirmed Romania's short-term rating of 'F3' and Country Ceiling of BBB+. In determining the ratings, Fitch found positive factors in the progress Romania has made on fiscal consolidation and the gradual settling down of the political scene after last year's turmoil between parliament and president. On the down side for Romania are the low growth forecasts for 2013, the seemingly perennial threat of eurozone problems affecting the local economy and what Fitch terms “structural shortcomings.” Fitch recounts the narrowing of Romania's deficit in recent years, against what the ratings agency describes as a backdrop of poor economic activity. Public debt in Romania should reach a peak of between 38 and 39 percent of GDP in 2015, after which, it will begin to fall, according to Fitch's predictions for the country. Fitch blames the low growth forecast, like many others, on state-owned business, poor EU funds absorption and ongoing eurozone difficulties. Romania's banking sector “does not pose a material contingent liability for the sovereign, given that it is mostly foreign-owned and well capitalized,” according to Fitch Ratings. The poor financial results and rising levels of non-performing loans across the local banking sector are, however, noted. Fitch Rating sees a balance of risks in Romania, hence the stable outlook. A slow down in the pace of reform, particularly the restructuring and privatization of the public sector, would threaten the outlook for Romania. Fitch judges that reform must be pursued “vigorously.” Speedy reforms and better EU funds absorption would move Fitch Ratings to improve its outlook for Romania. editor@romania-insider.com