Moody’s said that a better absorption of EU structural facts would be another factor that could lead to an upgrade in the country’s ratings.
On the other hand, a reversal of the fiscal consolidation program combined with stasis in structural reform would worsen credit metrics to levels that may eventually be inconsistent with Romania’s current rating, the ratings agency said.
Moody’s has Romania at ‘Baa3’, with stable outlook.
The agency warned that Romania’s “newly accelerated growth momentum” could be affected by a growth downturn in Europe, as around 70% of its exports go to European countries.
In addition, some 80% of the country’s banks are foreign owned, mostly by European banks.
“Given the Romanian banking system’s high loan/deposit ratios, uncertainties regarding parent bank support could dampen loan growth and constrain foreign currency liquidity in Romania’s financial sector, thus becoming a channel for the transmission of the euro area’s sovereign debt crisis to Romania,” Moody’s said.
However, the external financing risks are somewhat mitigated by Romania’s access to international funds via its loan agreements with the International Monetary Fund, the European Commission and the World Bank, Moody’s noted.