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      Scope has completed a monitoring review for Romania
      FRIDAY, 08/09/2023 - Scope Ratings GmbH
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      Scope has completed a monitoring review for Romania

      The periodic review has resulted in no rating action.

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

      Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

      Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review for Romania (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BBB-/Stable; short-term local- and foreign-currency issuer ratings: S-2/Stable) on 1 September 2023.

      This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

      Key rating factors

      Romania’s BBB- ratings are underpinned by the following credit strengths: i) strong medium-term growth potential, which Scope estimates at around 4% annually; ii) EU membership and significant structural and recovery fund inflows in coming years; and iii) Romania’s moderate general government debt of 47.3% of GDP at the end of 2022.

      Despite these credit strengths, Romania faces significant credit challenges. First, a rigid budget structure and a weak tax base constrain the budgetary outlook and have resulted in structural budget deficits. Further, Romania has high current-account deficits, due in part to fiscal imbalances and weaker competitiveness relative to regional trading partners. Lastly, Romania’s international reserves are moderate in covering foreign-currency liabilities under more stressed economic scenarios, representing a balance of payment risk.

      The Stable Outlook reflects Scope’s view that the risks Romania faces over the next 12 to 18 months are well balanced.

      The ratings/Outlook could be upgraded if, individually or collectively: i) fiscal consolidation policies were sustained and strengthened, anchoring Romania’s debt-to-GDP trajectory; ii) external sector risks were curtailed, for example via a sustained reduction in current account deficits, a build-up of foreign exchange reserves and/or tangible steps taken in the adoption of the euro; and/or iii) the government’s capacity for reform were strengthened, including improvements in EU fund absorption.

      Conversely, the ratings/Outlook could be downgraded if, individually or collectively: i) weaker fiscal metrics resulted in a substantive deterioration of the medium-term debt outlook; ii) external vulnerabilities increased, including via elevated current account deficits, intensified financing pressures and/or shrinking international reserves; and/or iii) the ability to effectively absorb EU investment funds weakened, undermining macroeconomic and public finance outlooks.

      For the latest information on Romania’s ratings, click here.

      The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 September 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst Julian Zimmermann, Associate Director

      © 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

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