BUCHAREST (Romania), December 8 (SeeNews) – Romania's sovereign credit ratings and outlook will not be affected by the outcome of presidential elections, held on December 6, global rating agency Standard & Poor's said late on Monday.
The agency also said it expects the political environment in the country to stabilize following the formation of a new government, and that this government will continue to comply with the IMF- and EU-backed program.
Standard & Poor's issued the following statement:
"Standard & Poor's Ratings Services said today that its sovereign credit ratings and outlook on the Republic of Romania (foreign currency BB+/Negative/B; local currency BBB-/Negative/A-3) are not affected by the outcome of yesterday's presidential elections.
Provisional results indicate a very tight victory for the incumbent president, Traian Basescu (of the Democratic Liberal Party; DLP), who gained 50.3% of the vote. Mr. Basescu is likely to seek support for a new DLP-led government among the opposition parties, but such a narrow margin of victory may complicate the process of the new government's formation. We believe the prospect of early elections cannot be excluded at this stage.
Despite a tense intra-coalition environment since the general elections in 2008--and particularly ahead of the presidential elections--the government coalition that was in place until October 2009 had been successful in implementing the country's IMF/EU program, which was reflected in the completion of the first review and subsequent disbursements. We expect that the political environment will stabilize following the formation of a new government, and that this government will continue to comply with the IMF/EU program. This would allow the continuation of structural reforms that support the budgetary consolidation process over the medium term, and support the ratings at the current level.
In our view, planned budgetary measures aimed at restraining the public wage bill, new pension reform, and the establishment of a credible fiscal framework that includes budgetary rules are of particular importance if the government is to achieve its budgetary deficit targets of 7.3% of GDP this year and 5.9% of GDP in 2010. A swift formation of a new government would enable the authorities to restrain the seasonal government spending slippages which have regularly characterized budgetary developments in Romania in the past, and ensure the budget deficit is maintained in line with this year's target.
There is a risk, however, that the formation of the new government results in a protracted period of political stalemate. If this occurs, such that the government is prevented from carrying out its economic and fiscal consolidation program in line with the IMF/EU program, and has difficulties in refinancing its debt, the sovereign credit ratings on Romania could come under further downward pressure."