S&P's Downgrade of Romania's Rating Can Put at Risk Country's C/A Gap's Financing - FinMin

Global rating agency Standard & Poor's (S&P) on Monday lowered its long-term and short-term foreign currency sovereign credit ratings on Romania to 'BB+/B' from 'BBB-/A-3', and its local currency long-term rating to 'BBB-' from 'BBB', setting a negative outlook. It said that the downgrade reflects the mounting risks to Romania's real economy.

"Such decisions are extremely dangerous because they can exacerbate the negative trends mentioned by the credit agency, namely a drastic reduction of capital inflows and the current account deficit's sustainability, at a time when Romania has demonstrated a good resistance against the effects of the international financial crisis," Vosganian said in a statement.

Romania is vulnerable to a sudden-stop scenario where capital inflows dry up or even reverse, which would require a drastic real economic adjustment and bring about a substantial and sustained deterioration in the government's balance sheet, as deficits rise and financial sector contingent liabilities materialise, S&P said on Monday.

"In our opinion, [...] this decision is surprising given the fact that the causes on which the downgrade is based can be found in other countries as well, sometimes at even more worrying levels," the minister claimed.

Romania's current account gap is seen shrinking to 13.2% of gross domestic product (GDP) this year from 14% in 2007, according to the latest forecast of the country's prognosis commission, the government's team of economic advisers.

At the same time Vosganian rejected media reports that Romania intends to ask for financial assistance from the International Monetary Fund (IMF).

"We would like to recall that Romania is not included in the category of countries that negotiate loans with the IMF," Vosganian said.