July 22 (SeeNews) - Analysts said on Friday they do not expect a change in Romania's ratings and outlook by Fitch, however the agency is likely to criticise the authorities for the significant fiscal loosening ahead of the upcoming elections and warn of a worsening external balance and a generally weaker outlook going forward.
"We do not expect any change to occur neither on the rating nor on the outlook. At the previous rating review (22 January), Fitch stressed the risks stemming from fiscal loosening and was concerned about the pro-cyclical nature of the Fiscal Code," 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 both the rating and the outlook from Fitch’s review.
"Government debt/GDP remains lower than 'BBB' peers and economic growth likely surprised to the upside relative to an expected rate above median peers, but we do not see this as grounds to act, given growing domestic risks," ING Bank commented in a daily snapshot on the markets.
"The potential for fiscal slippages amid populist MP plans ahead of this year’s elections and the deterioration of the external balance might warrant some words of caution from Fitch that could provide relevant hints for future decisions," it added.
Earlier this week, Erste Bank analysts suggested that Fitch could decide to change Romania's outlook to negative from stable due to the remarkable fiscal loosening.
"We expect Romania’s rating to be affirmed by Fitch, but do not completely rule out a change of the outlook to negative, due to the unprecedented fiscal loosening in Romania, the strongest fiscal loosening in the EU since 2010," Erste said in its CEE Insights weekly report.
In January, Fitch affirmed Romania's rating at BBB-, the lowest rung on the investment grade ladder, with stable outlook.
In April, Standard & Poor's also maintained Romania's BBB- sovereign credit rating with a stable outlook, saying that elevated policy uncertainty in the run-up to the November general elections might lead to a further deterioration in public finances.
In December 2015, Moody's improved the outlook on Romania's Baa3 rating to positive from stable, citing significant progress in correcting macroeconomic imbalances and a substantial reduction of the fiscal deficit in the recent past, contributing to a stabilisation of the debt-to-GDP ratio.
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