Wednesday, June 8, 2011

Romanian Junk Rating Affirmed at S&P on Growth Outlook, Debt

Romania had its credit rating maintained by Standard & Poor’s at BB+, one level below investment grade, with a stable outlook, due to the country’s economic growth potential and moderate government debt.

The Balkan nation’s government is likely to continue trimming its budget deficit while a precautionary loan accord with the International Monetary Fund and the European Union will minimize fiscal-slippage risks ahead of a general election in 2012, S&P credit analyst Marko Mrsnik said in a statement today.

“If the government maintains the momentum of its current structural reforms, building a sustained track record of fiscal prudence and maintaining stability in the financial sector, we could raise the ratings,” S&P said in the statement.

Romania, which has taken two international loans from the IMF and the EU since 2009, will probably see an economic expansion this year, after its output shrank for two years, helped by western European demand for the country’s manufacturing products, including Dacia SA cars. The country is getting ready to tap international markets this week for the first time in more than a year to raise funds for its budget deficit, as it stops drawing money from international creditors.
Leu Gains

Romania’s leu, the third-best performer this year among more than 20 emerging-market currencies tracked by Bloomberg, fell 0.4 percent to 4.1720 per euro as of 1:15 p.m., while the Bucharest Stock Exchange’s benchmark BET index dropped 0.4 percent to 5540,32.

The Balkan nation took a 5 billion-euro ($7.3 billion) precautionary loan from the IMF this year to reassure investors it will maintain fiscal discipline ahead of elections next year and narrow itsbudget deficit to below 3 percent of gross domestic product in 2012.

“The 2011 deficit appears broadly attainable with continued adjustments in social welfare spending and public sector rationalization,” the S&P statement said. “Strengthening economic growth from 2012, if combined with spending prudence, should help to further reduce the deficit. However, we do not expect the government to fully meet its target without supplementary measures, which it may be reluctant to undertake in an election year.”

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

No comments: