Standard&Poor’s says no change expected in Romania’s stable perspective rating over the next year

Standard&Poor’s says no change expected in Romania’s stable perspective rating over the next year

Bucharest, July 31, 2015/ Independent Balkan News Agency

By Daniel Stroe

The Standard&Poor’s (S&P) financial evaluation agency has currently a stable perspective for Romania and expects no change in the next 12 months in the country’s ratings, Aarti Sakhuja, a credit analyst with the agency told state news wire Agerpres in an interview.

Romania could join the Euro Zone in 2019 if it meets the necessary criteria and enters the Exchange Rate Mechanism (ERM-II) by 2017, according to her. S&P’s scenario includes no benefit resulting from the Euro Zone membership. Therefore, a delay in the euro adoption calendar would have no impact upon Romania’s ratings.

Romania hopes to join Euro Zone in 2019, after dumping the 2015 initial objective. Sakhuja adds that Romania is more vulnerable to a slowdown of the economy in the European Union, an important destination for the Romanian exports, than to the events in Greece.

Romania’s Gross Domestic Product grew by 4.1pct in Q1 2015 compared to the same period in 2014, and compared to Q4 2014, the Romanian economy recorded a 1.5pct growth, following the revision of the seasonally adjusted terms, according to the second provisional variant, released early July by the country’s National Institute of Statistics (INS).

Over the last 11 years, Romania benefits from the ‘BBB minus/A-3,’ rating, for the long—and short-term debt in foreign and local currency, from the said agency, Aarti Sakhuja added.

In the S&P analyst’s opinion, the stable outlook balances the risks generated by the recent changes of the Tax Code to the public finances’ consolidation, with a perspective of relatively robust growth for Romania. Amendments proposed to the Tax Code, if enforced, would determine the review of forecasts referring to the general public finances’ strengthening, adds Sakhuja. Notwithstanding, we should consider any compensation measures in order to fully quantify the impact to the public deficit, she underlined.

“We believe that Romania should prove ability in implementing the structural and fiscal reforms, in the absence of a reduced monetary flexibility”, Sakhuja also said, as quoted by Agerpres. For instance, the recent modifications to the Tax Code could lead to an increase of the fiscal deficit by smaller collection if no compensation measures are taken, the S&P analyst concluded.

Last year, Romania’s economy grew by 2.8pct from 2013, above the budgeted level of 2.2pct and over the European Commission’s 2.1pct estimate in the autumn of 2013, shows the Report on Final Budget Execution for 2014, posted on the website of the Ministry of Public Finance.