In its Emerging Europe Sensitivity Index, the ratings agency said Romania’s key risk arises from its relatively high external leverage, with about 45% of domestic claims financed externally (above the 32% median).
“The banking sector is primarily controlled by foreigners; foreign currency lending, primarily in euros, accounts for 65% of the loan book, which would increase household debt burden in local currency terms, should the local currency depreciate,” the survey noted.
S&P index measures the relative vulnerability of emerging European countries to disruptions in capital inflows. The survey assesses 19 non-eurozone nations, grouped into five categories according to vulnerability risks.
With a score below one point, Romania ranks among the sovereigns with a moderately low vulnerability to eurozone deleveraging, S&P said. The other countries in the group are Ukraine, Albania, Croatia, Bulgaria and Macedonia.
The least vulnerable countries to eurozone spillover are Russia, Kazakhstan and Azerbaijan, while the most vulnerable economies are Turkey and Hungary, the report noted.
S&P said that many of the surveyed countries have made good progress in rebalancing and deleveraging since the onset of the financial crisis in 2009.
“The economies of Albania, Ukraine, Serbia, Romania, Macedonia, Lithuania, Latvia, and Hungary are more open (as measured by exports to GDP) than ever before,” it noted.
However, any protracted weakening in eurozone demand for their exports, or waning eurozone parent bank support, could weaken confidence in emerging Europe, just as it appears to have adjusted to a less credit-driven growth model, S&P said.
S&P has Romania at “BB+” rating, with stable outlook.