S&P affirms Romania's rating with stable outlook

S&P affirms Romania's rating with stable outlook

S&P rating agency, on October 13, 2023, affirmed Romania's rating at BBB-/A3 for long-term and short-term government debt in foreign currency, as well as a stable outlook, the Ministry of Finance (MF) said on Saturday.

According to MF, the decision to reconfirm the sovereign rating and maintain the stable outlook is supported, in the agency's opinion, by the low level of external and government debt and the solid growth prospects.

However, S&P expects Romania's commitments under the EU's Recovery and Resilience Mechanism (RRM) to continue to be an anchor for policy and fiscal reforms.

"S&P's rating reaffirmation is a recognition of our firm commitment to maintain economic stability, control the budget deficit and promote structural reforms. This will help us to access capital markets at lower costs and attract more foreign investment, which will contribute to economic growth, and for people it will mean creating jobs and improving the quality of life. The Ministry of Finance maintains its priorities and objectives of implementing measures to ensure fiscal-budgetary consolidation and those necessary to ensure sustainable economic growth in Romania in the medium term. We are committed to maintaining prudent management of public finance and to gradually reducing the deficit," said Finance Minister Marcel Bolos.

In its assessment, S&P highlights the commitments to continue reforms and the balanced and credible medium-term fiscal agenda underpinned by Romania's Recovery and Resilience Strategy. It also underlines the resilience shown by the labour market in Romania, as well as real wage growth, which turned positive in March 2023, earlier than in many other Central and Eastern European countries.

According to the agency, Romania's economy will grow 2.3% in 2023, and almost 4% on average by 2026, provided that the country benefits from significant European funds from both the Multiannual Financial Framework 2021-2027 and the Recovery and Resilience Mechanism (RRM).

The main factors that may lead to an improvement in the country's rating or outlook are the structural reduction of the fiscal and current account deficits and the sustained improvement in Romania's economic performance. At the same time, lower government debt servicing costs through an improved debt structure may be another positive factor.

"The agency could decide to lower the country's rating or outlook if there is real growth in the economy significantly below the agency's current expectations and if government efforts are insufficient for medium-term fiscal consolidation to sustainably reduce deficits," MF says.

On September 8, 2023, Fitch rating agency reconfirmed Romania's government debt rating at BBB-/F3 for long-term and short-term foreign currency debt and a stable outlook.