S&P Raises Outlook on Romania, Still below Bulgaria

Romania’s credit rating outlook was raised to stable from negative at Standard & Poor’s after the International Monetary Fund resumed a bailout loan to the country and the government passed an austerity budget.

It affirmed its 'BB+/B' long- and short-term foreign currency sovereign credit ratings and its 'BBB-/A-3' long- and short-term local currency sovereign credit ratings on the country.

The EU’s second poorest country, which aims to sell euro-denominated bonds in the next week, is rated below Bulgaria, its neighbor, and in line with Azerbaijan and Montenegro.

“The outlook revision reflects our view of Romania’s sustained budgetary reform program and our belief that the government is likely to continue to comply with the International Monetary Fund and European Union standby agreement,” S&P credit analyst Marko Mrsnik said in the statement.

But, S&P warned that the ratings could come under pressure if the Romanian government fails to adhere to the economic and fiscal consolidation strategy, up to and beyond the termination of the standby agreement in 2011, or if the private sector's access to external financing worsens, exacerbating the banking system's vulnerabilities.

The rating agency said Romania's gross domestic product is likely to recover slightly in 2010, thanks mainly to an anticipated recovery in external demand. Domestic demand is likely to remain subdued. GDP contracted about 7.1% in 2009.