January 20 (SeeNews) - Analysts said on Friday they do not expect a change in Romania's ratings and outlook by Fitch, though the agency is likely to criticise the authorities for the significant fiscal loosening following elections and warn of a generally weaker outlook going forward.
In July, Fitch maintained Romania's long-term foreign currency issuer default ratings (IDR) at BBB- but cut the country's long-term local currency IDR by one notch to BBB-.
"We do not expect any change neither on the rating nor on the outlook. Still, if a communique is released, it is likely to contain some negative comments regarding the worsening of the fiscal outlook," Raiffeisen Research said in its daily bulletin ahead of Fitch's rating review expected later on Friday.
For their part, ING analysts also said that they expect no change in the rating, but are uncertain about the rating outlook.
"We do not expect any changes from Friday’s ratings review by Fitch, though we might see some words of caution regarding the fiscal outlook," ING Bank commented in a daily snapshot on the markets.
On Sunday, Romania's prime minister Sorin Grindeanu said he expects the country's economy to grow by 5.2% in 2017, inflation to come in at 1.4% and budget deficit to remain below the EU-agreed threshold of 3%.
In the analysts' opinion, the government will struggle to keep the budget deficit below 3% of GDP in 2017 and 2018, due to new VAT and tax cuts.
Last week, Romania's president Klaus Iohannis signed into law a bill doing away with health and social insurance contributions paid by all pensioners and scrapping income tax on pensions under 2,000 lei ($474/445 euro). At the beginning of January, Iohannis also signed into law a bill eliminating 102 fees and charges, initiated by governing Social Democrat Party (PSD). Also at the beginning of January, the government approved an increase of the minimum wage by 16% to 1,450 lei, to take effect on February 1. Romania also reduced its VAT rate from 20% to 19% as of January 1. This rate cut follows the 2016 reduction to 20% from 24%.
In December, Moody's said that the significant deterioration in Romania's fiscal position and its impact upon the country's debt trajectory could weigh on Romania's rating outlook. In April and August, Moody's skipped the outlook and rating review for Romania. It last reviewed Romania's rating in December 2015, when it improved the outlook on the country's Baa3 rating to positive from stable.
In October, Standard & Poor's maintained Romania's rating at BBB-, with a stable outlook.
Raiffeisen Bank SA is among the biggest banks in SEE. You can download our SEE Top 100 ranking
here or subscribe to our free Top 100 newsletter
here