August 18 (SeeNews) - Moody's could downgrade its outlook on Romania's Baa3 rating from positive to stable on Friday due to fiscal loosening and political uncertainty, but there are also significant chances that the agency won't make any change in the rating and the outlook, analysts said.
All three major global credit rating agencies rate Romania at the lowest rung of the investment grade ladder, but Moody's is the only that has an upbeat outlook on the rating, while Fitch and Standard & Poor's have a more balanced view, with stable outlooks, amid ongoing fiscal loosening and populist moves ahead of the general elections in the country in November.
"On the one hand the fundamental situation did not change much from last November when Moody’s upped Romania’s outlook to positive," Raiffeisen Bank International (RBI) analysts said in a daily comment on the financial markets earlier this week.
However, they noted that the polls and growing fiscal risks, including the possibility of budget deficit exceeding 3% of GDP, would speak against the upgrade direction going forward.
"In this regard the positive outlook could become redundant and Moody’s may like to remove it and replace with stable outlook. As a result we see a 50/50 chance for Moody’s outlook change to stable for Romania," Raiffeisen Research concluded.
For their part, Erste Bank analysts said that they do not expect a change in neither the rating nor the outlook.
Earlier this week, Erste revised up Romania's 2016 economic growth forecast to 4.5% from 4.1%, following a surprising spike in the annual GDP growth rate to a nearly 8-year high of 6% in the second quarter of the year.
However, Erste cut its 2017 growth estimate to 3.4% from 3.6% due to possible measures the government could take to keep the budget deficit under control and external risks.
In April, Moody's skipped the outlook and rating review for Romania.
In December 2015, it improved its 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.
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-. The outlook on Romania's ratings remained stable.
In April, S&P also maintained Romania's BBB- sovereign 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.
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