“The key to Romania’s credit strength is its relatively large and diversified economy with approximately 4% medium-term economic growth potential, one of the highest in Central and Eastern Europe (CEE). The country has clusters of excellence in information and communications technology and manufacturing industries. Thanks to a high-quality human capital, the country attracts foreign companies with a long-standing commitment”, the rating agency also said in its report.
Moody’s said it would change Romania’s outlook back to stable if it concluded that the Romanian government had halted and, in the medium term, would reverse the structural deterioration in public finances.
“However, downward rating pressure would likely develop if its fiscal strength were to continue to structurally deteriorate while external imbalances remain elevated”, said Olivier Chemla, a VP-Senior Analyst at Moody’s and the author of the report.
Still, the main credit challenges include rising macroeconomic imbalances, and fiscal and current-account deficits driven by pro-cyclical policies in the past and a high share of rigid public spending. Romania’s economy could rebound by benefiting from domestic demand and gradual and successful implementation of NextGen EU funds, according to Moody’s.