FinMin Citu calls Fitch's downgrading Romania's credit outlook warning to populist MPs

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Published: 18/04/2020 22:12

The decision by Fitch Ratings, which has revised Romania's outlook to negative from stable, is a clear warning given to populist MPs, Finance Minister Florin Citu wrote on Saturday on his Facebook page.

"In a statement Fitch confirms what I have said. It is easy to make a big deficit on paper but problems can arise in financing if the deficit is widened without providing sources for its funding. Therefore I have always said that the most dangerous thing for economic stability in Romania at the moment is the populism displayed in Parliament by legislative initiatives voted by all the opposition parties. Projects without any foundation reduce the revenues and increase the government outlays. None of these projects say where the funding for a bigger deficit comes from. There are legislative initiatives that trade in the most cynical way the health of the Romanians and economic stability for a few votes. And the rating agency penalises these cynical populists in the Romanian Parliament, "said Citu.

Fitch Ratings forecasts Romania's general government deficit to widen to 8% of GDP in 2020, reflecting a projected sharp fall in revenue as most economic sectors suffer and an increase in expenditure, driven in part by automatic stabilisers, expecting it to narrow in 2021, to 4.2% of GDP.

"As I said, I make sure that all the expenses in the aggregate budget are paid on time. I am in talks with the financial market players every day to make sure that we are financing the deficit at the best costs in the current economic context. Any unfounded increase in the budget deficit may endanger this balance," said Citu. He added thet the rating agency Fitch also confirms the "V" economy recovery scenario.

According to Fitch, the Romanian economy would contract by 5.9% in 2020, after a 4.1% advance in 2019, while unemployment rate should jump to 8% in 2020 (the highest one year increase on record) from a record low of 3.9% in 2019. "We forecast the economy to expand by over 5% in 2021, driven by strong growth in manufacturing and services exports, a pick-up in investment (both public and private) and a recovery in consumption.However, we see material downside risk to our short- and medium- term growth forecasts, given uncertainty surrounding the extent and duration of economic and social restrictions," according to Fitch Ratings.

Referring to the Fitch decision to revise Romania's outlook to negative from stable, while affirming the Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at 'BBB-', Citu said that "given the ongoing crisis in the global economy, affirming the rating shows the agency's confidence in the measures taken by this government. "

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