Monday, November 10, 2008

Fitch demotes Romania to BB plus

BUCHAREST, Nov. 10 (Xinhua) -- Fitch Credit Rating Agency on Monday lowered to BB plus, with negative prospects, from BBB, Romania's rating for long-term credits in hard currency, and dropped long-term credits in the national currency Lei, to BBB minus, also with negative prospects, Romania's Agerpres news agency reported.

Fitch explained that the two-step demotion of Romania's credit rating, which was removed from the investment grade category, (low risk for investments), mirrors its concerns for Romania's macroeconomic policy as well as for the country's ability to avoid a severe economic and financial crisis.

Romania, according to Fitch, is likely to need external financial support to prevent a credit crisis. That, Fitch said, takes into consideration that Romania has been facing a current account deficit that is expected to exceed 14 percent of the country's gross domestic product this year.

Fitch's decision comes about two weeks after Standard & Poor's also removed Romania from the investment grade category.

Romania rejected S&P critics and said it did not need International Monetary Fund (IMF) support. The IMF in turn, denied rumors that it has been discussing a financial support package with Romania.

Fitch and S&P's comments are similar warnings that risks to the Romanian economy may increase because of growth in private debt on foreign markets

Bucharest political actors ignored the alarm signals and got more involved in the parliamentary elections due on Nov. 30, Fitch said.

Along with Romania's rating, Fitch also demoted the ratings of Bulgaria, Hungary and Kazakhstan, considering that those emerging countries are most vulnerable to the deterioration of the global financial environment because of high account deficits and large short-term foreign debt.

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