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Moody's could revise Romania's outlook to stable due to fiscal slippages - analysts

Moody's could revise Romania's outlook to stable due to fiscal slippages - analysts Romania ratings Author (SeeNews Wire) License: all rights reserved.

BUCHAREST (Romania), April 21 (SeeNews) - Moody's is expected on Friday to keep Romania's rating for foreign currency long term debt to Baa3, but could revise the outlook from positive to stable due to fiscal slippages, Raiffeisen Bank analysts said.

Moody's last reviewed Romania's rating in December 2015, when it improved the outlook on the country's Baa3 rating to positive from stable.

"Moody’s may keep the “positive” outlook, but a revision to “stable” should not be excluded given the risks of fiscal slippages that Romania is facing. The “positive” outlook was set one and a half year ago, i.e. in December 2015, when the risks of fiscal slippages were much lower," Raiffeisen Bank analysts said in a daily market report.

Earlier in April. Standard&Poor's maintained Romania's rating at BBB-/A-3, with a stable outlook, and said that the country's deficit will widen due to the government's loose fiscal policy.

In March, Japan Credit Rating Agency (JCRA) has affirmed the outlook on Romania's long-term government debt in foreign currency and local currency to BBB/BBB+ stable.

In January, Fitch Ratings affirmed Romania's long-term foreign and local currency issuer default ratings (IDR) at 'BBB-', with stable outlooks.

In March, IMF mission chief in Romania Reza Baqir cautioned that without further measures to address the impact of tax cuts and wage and pension hikes, the country's budget deficit will increase to 3.8% of GDP in 2018. He added that in IMF's view the way forward to bring flexibility into the budget is for the government to realise that there is no room left for tax cuts.

Among the fiscal easing measures that have entered into force since the beginning of the year is a law doing away with health and social insurance contributions paid by pensioners and scrapping income tax on pensions under 2,000 lei ($469/443 euro), a bill eliminating 102 fees and charges, and a hike of the minimum wage by 16% to 1,450 lei. Romania also reduced its VAT rate from 20% to 19% as of January 1. This cut follows a reduction in the VAT rate from 24% to 20% in 2016.

On Tuesday, the IMF said that Romania's real GDP growth is projected to reach 4.2% in 2017 before it decelerates to 3.4% in 2018.

However, Romania's 2017 budget is based on projections for 5.2% economic growth and envisages a deficit equivalent to 2.99% of GDP under the European System of Accounts (ESA) standards.

Romania's economy expanded by 4.8% year-on-year in 2016 compared to a revised growth rate of 3.9% in 2015, provisional data from the country's statistical board, INS, showed.

(1 euro = 4.5441 lei)

 

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