Romania, One Of The Most Vulnerable Countries To Econ Crisis - Moody’s

"Moody's Global Sovereign Group identified a list of 'High Vigilance Countries,' i.e. countries that appear vulnerable to the current crisis and are more likely to face rating pressures. Among these are Hungary, Croatia, Romania, Bulgaria, Korea, Kazakhstan, Turkey, Ukraine, South Africa, Pakistan, and the Baltic countries," according to a Moody's press release.

 

Moody's has already started taking isolated rating actions, like on Ecuador, Pakistan, Jamaica, Hungary, Estonia, Latvia, and Lithuania, the press release stated.

When Moody's published its "2008 Mid-Year Outlooks for Global CDOs/Derivatives" in September 2008, its central macroeconomic scenario was assuming strong growth in emerging countries. The vast majority of sovereign credits were then showing a stable outlook, with less than 2% of the issuers placed under review for possible downgrade or associated with a negative outlook.

 

Since then, the financial crisis has started to affect the prospects for emerging market economies, and Moody's has published updated macroeconomic scenarios where emerging markets growth prospects have been revised downwards

 

Based on these considerations, Moody's has revised its Emerging Markets CDOs collateral performance outlook to Negative from Stable, and expects rating implications to be Negative on Emerging Markets CDOs tranches. CDOs (collateralized debt obligations) are investment-grade securities backed by revenues from loans.

 

Moody's notes the current funding dearth experienced by emerging markets countries is of a temporary nature, with most countries being able to endure it thanks to adequate reserves, access to non-market funding and/or sufficient integration to the world economy.

 

Moody's rating agency predicts a moderate contraction of Romania's economy in 2009.

 

"The economy would slow very dramatically beginning in the fourth quarter. All of the pieces are starting to line up against the Romanian economy, (...) the economy will need to undergo a difficult adjustment that could last 1-2 years. Export growth will decline because of the slowdown in the rest of the EU, and the global liquidity crisis will restrict capital inflows into Romania, hurting domestic consumption and investment," Moody's analyst Kenneth Orchard told MEDIAFAX in November.