ECONOMY INVESTMENTS

Ponta on Fitch’s latest country assessment: A significant message to investors

Prime Minister Victor Ponta says that the Fitch agency affirms the stable, positive outlook of Romania, showing that the agency’s assessment is an important message to investors.
“Fitch Agency reconfirms Romania’s country rating – and its stable, positive direction! It’s an important message to investors!” says Victor Ponta on his Facebook page on Sunday.
Fitch has reaffirmed the rating of Romania’s government debt on the long-term, in foreign and local currency, Issuer Default Ratings (IDR) at ‘BBB-‘ and ‘BBB’, respectively, the Public Finances Ministry has informed on Saturday, in a release to Agerpres.
“The affirmation of Romania’s ratings and Stable Outlook reflects the following factors: the country’s public finances currently compare favourably with ‘BBB’ range peers. Fitch projects Romania’s 2015 general government deficit at 1.8 percent of GDP, below the ‘BBB’ median of 2.5 percent, and its gross general government debt/GDP ratio at 40.5 percent of GDP, below the ‘BBB’ range median of 43.1 percent,” reads the release, stating further that “notwithstanding the developments in fiscal policy, Romania’s ratings are supported by a healthy economic outlook. For 2015-2017, Fitch forecasts real GDP growth to average 3.6 percent, compared with our previous forecast of 2.8 percent.”

The rating agency considers that growth will be driven by domestic demand, boosted by fiscal stimulus on household consumption and a recovery in private sector investment, while the recovery in the eurozone will limit the deterioration in net trade.

Fitch also notes that “Romania’s banking sector has remained stable, despite volatility in the external environment. Banks are well capitalised (sector CET1 ratio of 16.1 pct), and since the National Bank encouraged the write off and sale of bad loans last year, asset quality across the sector has also improved. The risks from the stock of Swiss franc-denominated loans in the sector have lessened.”

According to the agency, the main factors that could, individually or collectively, trigger a positive rating action include sustained low fiscal deficits leading to a reduction in the government debt/GDP ratio; higher trend economic growth and progressive convergence towards income levels of higher rated peers; a faster and sustained reduction in external debt ratios.

In early July, Moody’s Investors Service was estimating in a report on Romania that improved competitiveness, reduced domestic macro-economic imbalances, and the ongoing recovery in employment and domestic consumption will result in an average growth rate of around 3 percent in the next few years for the country.
The third major rating agency, Standard & Poor’s, awarded a “BBB minus” rating to Romania’s long-term credit.

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