S&P raises outlook on Romania to stable

S&P's move reflects the resumption of the IMF programme.

The outlook upgrade by S&P today follows a similar move by Fitch in February 2, which also raised its outlook on Romania from ‘negative’ to ‘stable’.

After this decision, all three rating agencies have improved their outlook to stable, but S&P and Fitch lowered the country’s ratings to junk, at the end of 2008.

Moody’s is the only agency to keep the country notch up from brink of junk territory.

“As immediate external and government financing risks have been resolved by the IMF/EU loan disbursements, Romania now has the time and breathing space to implement its ambitious fiscal structural reform programme, including reforms of pensions and public administration”, analyst Marko Mrsnik said.

The Government has a budget deficit target of 6.4% of GDP this year (by the ESA 95 standards), and expects to meet its target “should the reforms on pension and public sector wages progress as planned”.

S&P analysts expect the Romanian economy to pick up gradually 2010 after the 7.1% contraction recorded last year, “largely due to the external demand recovery in sight”, in the context of a still sluggish internal demand.