Moody�s: Economic contraction likely to drag on well into 2010

Vice President-Senior Analyst in Moody's Sovereign Risk Group, Kenneth Orchard (photo) said the country’s economic contraction would most likely be in the range of 8.9%, while for 2010, the analyst sees a slight growth of 1.2%.

“Although the largest contraction may be in Q2-Q3 this year, we believe that the economy will continue to shrink into the first half of 2010, before a slow recovery begins in the second half of next year”, Kenneth Orchard told Wall-Street.

Moody’s forecasts the country’s current account deficit would fall to 5.1% in 2009 from 14% in 2008 and continue reducing to 3.5% in 2010.

Currency exchange rates – impossible to predict

As for the future evolution of the leu, Kenneth Orchard refused to comment, adopting the same approach as the governor of National Bank of Romania.

“I do not comment on currency markets. If one is honest, they will admit that they are impossible to predict”, Moody’s analyst said.

Moody’s financial rating agency has affirmed Romania’s ratings and ceilings, outlook remaining stable. Moody’s decision to keep Romania’s status as an investment-grade country was supported by the government’s moderate debt burden and by its gradually deepening institutional strength derived from the EU accession.

Moody’s is the sole rating agency that still provides investment grade to Romania, after S&P and Fitch downgraded the country to junk. Romania’s FX IDR rating was affirmed at ‘Baa3’ with stable outlook.

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