S&P keeps Romaniaĺs rating in the speculative camp

Standard&Poor’s maintained on Thursday Romania’s country rating in the speculative investment grade camp, as the economy slid into serious recessionary fields while unemployment rates are expected to pass 11% mark by 2011, S&P said.
Ratings’ outlook remains ‘negative’, financial rating agency said. In October 2008, Standard&Poor’s downgraded Romania’s short and long-term credit rating in foreign currency from 'BBB-/A-3' to 'BB+/B', and long-term credit ratings in lei from 'BBB' to 'BBB-', thus removing Romania from investment grade status.

Moody’s is the only financial rating agency that decides to keep Romania’s status within the investment-grade parameters, after S&P and Fitch sent Romania to junk.

“In our view, Romania continues to face major financial threats due to sharp contraction of external demand and narrowed commercial lending channel, which left a deep imprint on internal demand”, said Marko Mrsnik analyst at Standard & Poor's.

Therefore, Romania has glided into a serious recession, and the current account deficit which is now accounting for 12.5% of gross domestic product, is currently adjusting and it could narrow to below 6% of GDP by year-end. This would eventually scale back wage increase drive and inflation, although it would largely depend on a further devaluation of the local currency.

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