S&P: Long term ratings for Romania still 'junk', improvements if Govt pushes through positive measures

Ratings agency Standard & Poor's (S&P) kept Romania's credit ratings at BB+ for long term financing, and at B with a stable perspective for short term financing, even if investors had been hoping the rating would come up one notch, to 'investment grade' level. “The ratings on Romania are constrained by Romania's comparatively low per capita GDP, developing institutions, and vulnerability to external shocks owing to its still-high, albeit declining, external debt,” according to S&P. On the financial markets, the BB+ rating is also known as 'junk', and is not recommended for long term investments. The ratings mainly refer to the financial instruments issued by the state. S&P analysts believe economic performance will be constrained by weak administrative capacity, which will constrain EU funds absorption, and by slow progress in implementing broader structural reforms in Romania. “The government is in the process of restructuring state-owned enterprises, particularly in the energy and transport sectors, but we believe there may be a reluctance to close loss-making companies or sell state assets. As a result of these factors, we do not expect growth to exceed 3 percent over the medium term,” reads the recent report. S&P could raise the ratings if the Romanian government continues to push through with structural reforms to improve competitiveness and potential growth, while building a sustained track record of fiscal prudence as external pressures diminish. editor@romania-insider.com