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 said in its statement.
Fitch expects Romania’s economy to grow by 2.1% in 2022 (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 in 2022, 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, the statement also reads.