The city’s foreign currency short-term rating has been also affirmed at ‘B’.

The revision in outlook reflects a similar rating action taken on Romania’s outlooks. The ratings reflect Oradea’s economic potential due to its strategic location near the Hungarian border and its improved budgetary performance, balanced by increased debt, higher-debt servicing needs and weakened debt coverage ratio.

However, Fitch notes that a negative rating action could be triggered by the operating margin falling below 10% and debt exceeding 100% of current revenues. Any downward rating action on Romania will automatically be reflected on Oradea’s ratings.

The ratings could also benefit from a positive change in the sovereign ratings as long as budgetary performance and debt remain at their current levels.

Romania’s highly centralized budgetary system ensures adequate support and control from the central government. The latter provides additional subsidies to support local infrastructure projects and supervises the city’s finances, including authorizing debt.