Positive rating from Standard & Poor’s
One of the largest international financial rating agencies confirms the stability of Romania's economy and growth prospects in the coming years
Daniela Budu, 14.10.2024, 14:00
The International Financial Rating Agency Standard & Poor’s has reconfirmed the good rating of the government debt and the stable outlook of Romania’s long-term and short-term foreign currency debt. Overall, a country’s rating factors in such elements as the evolution of the economy, the volume of public and private foreign investments, the transparency of the capital market and foreign exchange reserves, as well as the degree of political stability. Thus, in the case of Romania, the decision was mainly based on the positive economic evolution, on the moderate level of foreign debt, but also on an important growth perspective for the next three years. The report also highlights the good dynamic on the labor market, where unemployment remains close to historical lows. According to the report, Romania’s economy will register an increase of 1.6% this year, while economic growth will double its pace in the next three years, namely an average of about 3%, given that the country will benefit from important European funds, both from the Multiannual Financial Framework and from the Recovery and Resilience Mechanism. Romania’s rating could be downgraded, the financial rating agency warns however, if the deficit exceeds forecasts and if authorities don’t solve existing imbalances, such as high inflation or the current account deficit, namely the difference between high import volumes and low export volumes.
Standard and Poor’s also warned that current pre-election spending will push Romania’s deficit to 7.3% this year. At the same time, expenses will increase annually after public sector wages increased by 20%, which account for approximately 1% of the GDP, and an increase in pensions starting this September, which still accounts for 0.6% from GDP. Standard & Poor’s also mentions the increase in military spending to almost 2.5% of the GDP this year and high public investments, standing at approximately 7% of GDP, only partially covered by European funds.
In an online post, Prime Minister Marcel Ciolacu mentioned that the agency’s decision, after a similar rating announced by Fitch this summer, is evidence of the macroeconomic stability and development prospects of Romania. The Prime Minister admitted there is still a lot of work on, referring here to the plan to reduce the deficit over the next seven years, by rationalizing expenses and increasing revenue collection by digitizing the National Fiscal Authority (ANAF), reducing tax evasion and continuing investments. The Prime Minister reiterated that Standard & Poor’s analysis confirms “the safe path for Romania: production, investments, jobs, purchasing power and macroeconomic stability”. For his part, the Minister of Finance, Marcel Boloş, stated that the agency’s positive rating for Romania sends a positive signal that obliges the Government to continue reforms, to make public spending more efficient and to ease pressure on the state budget. (VP)
