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Scope Ratings confirmed Romania's rating at BBB minus with negative perspective
The German agency financial evaluation Scope Ratings confirmed on Monday Romania's rating for long term debts in foreign and local exchanges at BBB minus, as well as the rating for short term debts at S2, a perspective associated for both ratings being maintained as negative, Scope Ratings informs in a press release.
The agency points out that the negative perspective for Romania's sovereign rating is caused by two reasons: the deterioration of public finances after several years of expansionist fiscal policy, which according to Scope Ratings will take government deficit at 9% of GDP in 2019 and a public debt – GDP ratio of 45%, as well as limited official reserves to cover foreign exchange debts under high stress, which reduces the size of monetary policy actions available to support domestic economy beyond measures announced until now.
On the other hand, confirming the investment rating type BBB minus given to Romania takes into account some strong points such as being an EU state, which brings about access to investment funds, a robust economic increase potential despite the health crisis and the moderate level of public and foreign debt.
Scope Ratings warns it could reduce Romania's rating in the next 12-18 months if the continuation of structural deficits or the lack of fiscal consolidation will result in the deterioration of average term debt sustainability; the depreciation of the exchange rate or reduction of official reserves will increase the probability of the balance of payment and/or the reduction of support from European institutions will expose Romania to a drop of long term financing sources needed to stabilize the growth potential.
On the other sense, the perspective associated to Romania's rating could be improved at stable if an efficient political answer could lead to the adjustment of fiscal policies which allows a return to a sustainable trajectory of debt in the next two years and a strong investment support from European institutions which could facilitate a rapid return and/ or the implementation of structural reforms in the education system and labor market which could support Romania's long term growth potential.