February 27 (SeeNews) - Moody's and S&P are most likely to leave Romania's rating unchanged on Friday, UniCredit Bank has said.
"We expect both agencies to maintain Romania's ratings unchanged at Baa3-stable and BBB- stable, respectively, although new warnings on fiscal risks are likely," UniCredit said in a weekly e-mailed note on Romania on Monday.
In April 2017, Moody's Investors Service changed the outlook on Romania's Baa3 government bond rating to stable from positive due to deterioration in public finance and debt outlook for government.
In October 2017, Standard & Poor's maintained Romania's rating at BBB-/A-3, with a stable outlook, and said that the country's budget and trade deficits will widen due to the consumption-focused growth.
"Romania's procyclical budgetary stance is amplifying wage pressures in an already overheating economy. While wage convergence is desirable, pay increases that significantly outpace underlying productivity have historically led to boom-bust cycles," S&P said at the time.
S&P also said it expects the consumption-focused growth to generate wider fiscal and external deficits, increasing the economy's vulnerability to an abrupt downturn over the medium term, though public and external debt is modest.
Fitch last rated Romania in January, when it affirmed its long-term foreign and local currency issuer default ratings (IDR) at 'BBB-', with stable outlooks and warned that the expansionary fiscal policy had weakened the country's public finances.
In February, Fitch Ratings said that Romania's economy will grow by 3.8% this year but warned on growing macro-economic imbalances.
"Romania's expansionary fiscal policy looks set to continue following last month's change of prime minister and this will increase macro-economic imbalances," Fitch Ratings said in a commentary published on its website. Fitch also sees a sizeable structural budget deficit which will make Romania's public finances more vulnerable to shocks.
At the beginning of February, Romanian finance ministry analysts raised their forecast for the country's 2018 economic growth to 6.1% from 5.5%, based on expectations of more robust performance across sectors than originally projected.
Romania's economy expanded by 7% year-on-year in 2017 compared to growth of 4.8% in the previous year, according to flash data from the country's statistical board.
(1 euro=4.6613 lei)