Moody's says favourable medium-term growth prospects supporting Romania's credit profile

Main credit challenges facing Romania include the expansionary fiscal policy stance and deteriorating current account balance, according to the findings of a Moody's Investors Service annual report, which predicts real GDP growth of 3.3pct in 2019 and 3.5pct in 2020 backed by resilient domestic demand. The credit profile of Romania (Baa3 stable) balances the country's favourable medium-term growth prospects against rising fiscal and external vulnerabilities, Moody's Investors Service said in an annual report on Wednesday. Romania's main credit strength is its economic growth potential of around 4pct, one of the highest in the Central and Eastern European region. Moody's expects that resilient domestic demand will support real GDP growth of 3.3pct in 2019 and 3.5pct in 2020. "Romania's economy benefits from clusters of excellence in strategic industries and sectoral diversification. The high quality of its human capital attracts foreign companies with a long-standing commitment to the country," according to Olivier Chemla, a Moody's Vice President - Senior Analyst and the report's co-author. The main credit challenges include the expansionary fiscal policy stance that has eroded consolidation gains since the 2008-2009 global financial crisis. Its relatively low absorption of EU funds and rising domestic political volatility associated with increasing external vulnerability also weigh on the credit profile, according to the report. Evidence of a sustained improvement in Romania's fiscal and external metrics, accompanied by greater policy predictability and credibility and institutional effectiveness, would be credit positive, says Moody's. "Downward pressure would be likely to develop if negative institutional and fiscal trends persist and Romania's susceptibility to event risk continues to rise. Evidence of rising macroeconomic imbalances or a further material deterioration in Romania's balance of payments and international investment position would also be negative," writes Moody's. AGERPRES (RO - author: Mihaela Dicu, editor: Mariana Nica; EN - author: Corneliu-Aurelian Colceriu, editor: Adina Panaitescu)