ING Analysts Expect Romania’s Ratings To Improve In 2011

„As can be seen, fiscal consolidation is at the core of any rating upgrade. We believe that budget deficit targets for both 2010 and 2011 are likely to be missed, but we also see the IMF/EU deal as staying in place due to progress in fiscal policy implementation – this means the budget deficit will likely be lowered, but probably not as much as forecasted currently (from RON36 billion in 2009 to RON32 billion in 2010 and RON26 billion in 2011),” the document reads.

At the same time, ING notes that Romanian President Traian Basescu „talked about extending the IMF deal even after the current one ends in 2011,” which means fiscal consolidation should continue with IMF supervision, even though ING believes the pace will be slow and targets may be adjusted upwards to show larger budget deficits.

Basescu told IMF chief Dominique Strauss-Kahn on Tuesday that Romania wants a long term collaboration with the IMF.

In February, Fitch Ratings revised Romania’s outlook to stable from negative, while affirming the country’s ratings, citing an improvement in external financial and economic conditions.

Later, in March, Standard & Poor’s Ratings Services raised its outlook on Romania to stable from negative, citing budgetary consolidation and expectations that the country would continue to comply with an International Monetary Fund/EU agreement.

The ING analysis concludes saying that „A rating upgrade may come in 2011. Therefore, 2011 might bring some significant RON appreciation. Besides the above, the rating could be increased if the global economy recovers faster than expected currently.”