Moody's Places Romania In Second Rating Risk Category

Romania, Croatia and Bulgaria were rated Baa3 by Moody’s.

 

In Moody’s report entitled "Emerging' European Sovereigns: The Case for Risk Differentiation", the first category includes countries whose rating is well anchored (Czech Republic, Slovakia and Poland), the third includes countries whose relative credit fundamentals are being eroded but for whom external support provides a rating floor (Estonia, Lithuania, Latvia); and the fourth category includes countries whose credit fundamentals are eroded and support is less likely (Ukraine).

 

Moody's has also developed two 'Government Refinancing Risk Indicators': GRRI measures the refinancing risks of the government, whereas GRRI+ additionally includes contingent liabilities that may arise when the government takes on debt on behalf of banks or corporates.

 

"These indicators show that the most vulnerable countries are those that have been undergoing a rapid process of financial deepening -- namely Latvia,Lithuania, Romania and Ukraine," says Dietmar Hornung, Vice President --Senior Analyst in Moody's Sovereign Risk Group.

 

According to Moody's, the Romanian government should provide in 2009 a gross supplementary financing of EUR14.9 billion, representing 11.2% of the GDP, and 33.3% of revenues, respectively.

 

Romania's adjusted external financing need is at EUR29 billion, or 21.8% of the GDP, according to the report.

 

The Romanian government plans to borrow EUR19 billion from EC and IMF, following the evaluation carried out by Finance Ministry and the central bank, government sources told Mediafax Tuesday.

 

The global credit crisis is affecting all European governments to varying degrees, with the result that the ratings of some 'Emerging' European countries -- defined as those rated A or below -- have come under stress, Moody's said.

 

"In fact, there are two types of rating pressures: those stemming from a structural erosion in economic strength, and those that result from the susceptibility to credit events -- exchange rate or liquidity crises in particular -- making our ratings dependent on critical assumptions of international or regional  support," says Pierre Cailleteau, Managing Director of the Sovereign Risk Group.

 

"However, some 'emerging' European countries may be able to benefit from various financial solidarity mechanisms offered by the European Union, as it seems unlikely that these countries would be denied the help that was extended to banks and corporates at national and regional level," Kristin Lindow, Senior Vice President in Moody's Sovereign Risk Group, explained.