“The ratings are supported by Romania’s low and declining external debt stocks, its narrowing general government deficits, and moderate stocks of general government debt amid relatively firm growth prospects. The ratings are constrained by the governance framework, a relatively low GDP per capita of $9,600, and still-high–though declining–private-sector debt denominated in foreign currency, which can constrain monetary policy,” the agency stated.
The agency expects the Romanian economy to grow at an average of 2.7% over 2014-2017, as incomes rise with gradual productivity gains.
According to S&P, Romania underwent a technical recession in the first half of 2014, with two consecutive quarters of economic contraction owing primarily to weaker investment activity–in particular linked to the lower absorption of EU funds.
Thus, the agency estimates that Romania’s GDP growth will decelerate to 2.2% in 2014, and real GDP growth will average 2.7% during 2014-2017 with a gradual strengthening of domestic demand, despite a declining population and growth inhibitors such as poor infrastructure.
Standard & Poor’s considers that the Romanian government will meet its 2.2% of GDP deficit target for 2014, while sovereign indebtedness will remain largely flat over the coming three years, with gross general government debt just under 40% of GDP in 2017.
Emerging geopolitical risks are contained, according to the agency, as Romania’s economic links with Ukraine and Russia remain fairly limited.