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S&P doesn’t see imminent fiscal risk in Romania

International rating agency S&P said on September 14 that it does not expect imminent risks to Romania’s near-term fiscal consolidation following the resignation of USR-PLUS ministers on September 7. “Nevertheless, should the political deadlock persist, it could disrupt progress on much-needed fiscal reform,” it concludes on a note leaving the door open to a rather broad range of scenarios, https://www.romania-insider.com/ informs.

 

The absorption of EU funds and fiscal reforms are key to stabilizing the country’s fiscal and external positions, the rating agency’s statement reads.

 

The rather positive comment may look surprising if regarded from a short-term perspective. But from a longer-term perspective, the impact of the current protracted political turmoil has a much smaller impact on the fiscal policy compared to last year when the Social Democrats were threatening to damage the public finance sustainability with bills passed on a weekly basis, such as the one on 40% rise of the public pensions.

 

In April this year, S&P was the last of the major three to revise the country’s outlook to stable (from negative) in response to the new Government’s fiscal consolidation plans. The agency will review the country’s ratings on October 15. Until then, the political outlook will gain more visibility.

 

Under the baseline scenario, S&P assumes that the Government would aim to preserve its capacity to function over the short term in order to contract this funding, “which we understand is ready to be disbursed,” the agency reads.

In the rating agency’s view, the Government passing last week the budget revision “suggests that there is [enough] capacity to execute policy.”

 

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