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Fitch Downgrades Romania’s Rating By Two Notches To Below Invest Grade

Ratings agency Fitch has lowered on Monday the sovereign ratings on Romania by two notches, citing vulnerabilities in the emerging markets, spurred by the global crisis and the countries’ high current account deficits.
Fitch Downgrades Romania’s Rating By Two Notches To Below Invest Grade
10 nov. 2008, 10:01, English

Thus, Romania’s long-term foreign currency IDR downgraded to ‘BB+’ Negative Outlook from ‘BBB’ Negative Outlook, the long-term local currency IDR downgraded to ‘BBB-‘ (BBB minus) Negative Outlook from ‘BBB+’ Negative Outlook, the short-term foreign currency IDR downgraded to ‘B’ from ‘F3’, wile the Country Ceiling downgraded to ‘BBB’ from ‘A-‘ (A minus).

Romania’s two-notch downgrade reflects Fitch’s concerns about the macroeconomic policy framework in Romania and the country’s ability to deal with a severe economic and financial crisis.

Fitch stresses upon the need to have a much stronger policy adjustment to avoid the currency crisis, on Romania’s current account seen at 14% of GDP in 2008 fueled by excessive credit growth.

Thus, the country could require substantial external financial support from the international community to prevent a sovereign credit crisis. The rating Outlook is Negative.

Fitch Ratings has equally downgraded the sovereign ratings of Bulgaria, Hungary, Kazakhstan, while the ratings Outlook for South Africa and Russia have also been revised from Stable to Negative.

Standard & Poor’s Ratings Services downgraded Romania end-October to investment grade, with a negative outlook. Thus, S&P lowered its long- 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’, fueled by the high lending rate risks on international markets. The investment grade category requires an S&P rating of at least "BBB-".

Romanian central bank said mid-October the country’s current account deficit widened 1.6% on the year in January-August to EUR10.006 billion, mainly due to a higher trade deficit.

In the same period a year earlier, the trade deficit stood at EUR9.853 billion, central bank data showed.

In January-August 2008, the trade deficit, with imports and exports calculated free-on-board, made the bulk of the current account gap and stood at EUR11.714 billion.

Romania’s National Prognosis Commission CNP has revised up end-October, in its final fall prognosis report, the current account deficit estimation to 12.2% of gross domestic product for end-2009, from 11.85% of GDP in its preliminary fall data.

For 2008, CNP estimates a current account deficit of 13.2%, down from 13.4% in its preliminary prognosis.