International rating agency Fitch affirmed Romania's sovereign long-term rating (IDR) at BBB- on April 8, keeping it at the lowest investment-grade level, but maintaining the negative outlook.

Its GDP per capita, governance, and human development indicators would qualify Romania for better sovereign ratings - but the large twin budget and current-account deficits (above peers), a weak record of fiscal consolidation and high budget rigidities, plus a fairly high net external debtor position are dragging the overall score down close to the junk area, the rating agency explains.

Fitch expects Romania's economy to grow by 2.1% this year (versus the 4.3% official forecast issued before February 24), as well as a 7.1%-of-GDP public deficit (6.3% official target) that would still not put pressure on the mildly rising debt-to-GDP ratio seen at 51.3%-of-GDP at end-2023.

The current account deficit is expected to moderate slightly this year, yet remaining at a huge level of 6.8% of GDP (versus a 1% median for BBB peers).

The key element monitored with a view of revising the sovereign rating remains the fiscal conduct. Supplementary, slower growth prospects over prolonged periods of time with impact on fiscal metrics or failure to attract non-debt generating inflows could lead to negative rating action/downgrade.

iulian@romania-insider.com

(Photo source: Erik Lattwein/Dreamstime.com)