Credit rating firm Moody’s Investors Service has raised Romania’s credit outlook from negative to stable, pointing out to declining financing risks and macroeconomic stability.
It also maintained the nation’s long-term government bond rating at Baa3, which is on par with India, Turkey and Ireland.
“Despite a subdued growth outlook and several changes in government, the fiscal deficit was reduced to 2.3 percent of the gross-domestic product,” said Atsi Sheth and Bart Oosterveld, who are analysts with Moody’s, in a statement. “Moody’s expects this reduction to contribute to stabilization in government debt ratios, which underpins the return to a stable outlook on the rating.”
Romania’s euro-denominated bonds that mature in 2024 declined 0.06 percentage point, or six basis points to 3.59 percent on Friday, reported Bloomberg. The country, whose GDP surged the most among European Union members in the fourth quarter of 2013, rolled out tough austerity measures in 2010 by hiking value-added tax and slashing government salaries by a quarter.
Romania’s economy rose 5.4 percent in the fourth quarter, the strongest since 2008, led by bumper harvests, surging exports and industry output.
“Over the medium term, Moody’s expects Romania to continue along the path of income convergence with wealthier EU trading partners, supported by competitive wages and future policy measures to enhance productivity and the operating environment and these developments support a stable outlook on the rating,” Moody’s said in the statement.
Moody’s revealed that it will raise Romania’s sovereign debt rating if the GDP accelerates further and financing risks decline. It will also track whether external debt improves and state enterprises show greater efficiency. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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