S&P revises Romania view to negative

S&P said it revised the outlook on Romania to negative from stable. At the same time, the agency affirmed its long-term foreign and local currency sovereign credit ratings at BBB-.

“The outlook revision reflects increasing risks to Romania’s economic and fiscal stability should policymakers be unsuccessful stabilizing and consolidating Romania’s budgetary stance, including from plans to implement further pension hikes from next year,” said S&P in a press release.

Officials increased their projections for budgetary deficits for 2019 and 2020 to 4.3% and 3.5%, respectively, of GDP from 2.8% and 3%, signifying a major deviation from original goals. “These revisions largely reflect Romania’s new government’s transparent decision to settle overdue invoices and arrears with suppliers within the 2019 budget while revising downward its expectations for revenue growth,” S&P said.

Romania will likely end 2019 with headline growth of just under 4%, after consumption-led expansion. This follows average wage inflation so far this year of nearly 15% alongside increased government that boosts demand. S&P said it understands authorities plan to move ahead with a 7.2% increase in the minimum wage early in 2020, a measure that would likely contribute further to short-term overheating and an even wider current account deficit.

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