Furthermore, Fitch confirmed the country ceiling and the rating for the foreign currency short-term debts to ‘BBB’ and ‘B’, respectively. The improvement of the external economic and financial conditions, the higher-than-expected adjustment of the current account deficit in 2009, the overcoming of the election-related risks, the adoption of the 2010 budget and the anticipated normalization of the relationships with the IMF have lowered the pressure on Romania’s rating, Fitch Director David Heslam said.
Nevertheless, the rating agency believes that some risks exist with respect to the implementation of reorganization policies included in the 2010 budget, including the salary freeze in the public sector and the layoff of roughly 10,000 public employees, also considering both the reduced parliamentary majority the Government enjoys, as well as the poor fiscal performance in 2007-2008.
Moreover, Fitch says that the fiscal consolidation process should continue after 2010, in order to support the economy’s external adjustment process and to decrease the public debt growth tendency. Fitch forecasts that Romania’s general governmental debt will reach 33 percent of the GDP by the end of 2010, compared to 21.8 percent of the GDP at end-2008.
Regarding the Romanian economic evolution, Fitch estimates that in 2009 the GDP dropped 6.9 percent, as a consequence of the private consumption reduction. Nevertheless, it had another effect, i.e. the curbed demand for imported products and contributed to the adjustment over the expectations of the current account deficit.
Fitch estimates that in 2009 the current account deficit dropped to 4.5 percent of the GDP from 12 percent of the GDP in 2008, and it forecasts that over 2010-2011, the current account deficit will be maintained at around five percent of the GDP.
The improvement of the external economic and financial conditions helped the stabilization of the national currency leu, a fact that helped to keep control over the domestic balance deterioration and of the banking system pressure. The official foreign exchange reserves amounted to 44.5 billion dollars at the end of 2009, by 4.7 billion dollars greater than at the end of 2008.
Fitch anticipates that Romania’s external financing needs for 2010 will amount to 58 percent of the foreign exchange reserves, down from roughly 100 percent of the forex reserves in 2008.
Likewise, Standard & Poor’s rating agency had estimated on January 13, 2010, before the 2010 state budget adoption that Romania’s rating outlook could be improved, thus unlocking new instalments from the loan agreement concluded with the International Monetary Fund.
At present, Standard & Poor’s rates Romania at ‘BB plus’ the highest rating within the junk category, with negative outlook. The rating awarded to Romania by Fitch Ratings Agency is also included in the junk category. The only important rating agency to still award Romania a rating in the investment grade category is Moody’s Investors Service that awards a Baa3 rating.