International rating agency Moody's has deferred updating Romania's sovereign ratings, scheduled for October 23.

Thus, Romania's ratings remain at the lower end of the range seen by investors as safe or low-risk - Baa3 - with a negative perspective.

Moody's upgraded Romania to the investment-grade region in October 2006, amid the country's EU accession (2007), and has not downgraded it during the 2008-2009 recession.

To reflect the country's robust fiscal and current account consolidation, the rating agency improved its outlook to positive in December 2015. Following the expansionary fiscal policy and the procyclical macroeconomic policies, it downgraded Romania's outlook again to stable in April 2017. After three years during which the country has pursued similar pro-cyclical policies, Moody's put Romania on the negative watch list - meaning that it will take a final decision on whether to slash the rating to the non-investment (high-risk, or junk) area within 12-18 months.

Moody's deferred its final decision on October 23, as the uncertainty remains high underpinned by the political outlook and the sanitary crisis.

Ultimately, the downgrade would depend on a "determined and effective policy response to the country's structural challenges," meaning a credible fiscal consolidation plan.

This is expected to depend on the outcome of the December 6 general elections, with more chances for the reversal of pro-cyclical fiscal policy steps in the case of a new, robust majority formed around the current Liberal minority Government. S&P and Fitch have scheduled similar updates for Romania's rating on October 30 and December 4, and they are also expected to defer their decisions until more clarity is reached.

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andrei@romania-insider.com