La o zi dupa ce oficialii BNR avertizau ca legea privind darea in plata a caselor ipotecate in vederea iertarii de datorii ar putea determina scaderea ratingului Romaniei din nou in categoria "junk", nerecomandata investitiilor, agentia americana Standard&Poors (S&P) a anuntat ca mentine atat ratingul, la BBB-, cat si perspectiva stabila de scadere sau majorare a acestuia, cu toate ca a criticat legea.

Intr-un comunicat al S&P se arata urmatoarele: “In opinia noastra, legea darii in plata ar putea afecta recenta stabilizare a preturilor de pe piata imobiliara si cresterea creditarii si ar putea descuraja investitiile straine in sectorul nefinanciar. Din cate intelegem, scopul legii este sa sporeasca puterea de negociere a debitorilor cu bancile si sa le dea dreptul sa scape de datorii prin transferul ipotecii catre banca, fara ca aceasta sa mai aiba dreptul asupra altor bunuri personale ale datornicului. In aceste conditii, legea pare a se indeparta de la prevederile altor proceduri privind insolventa personala din alte state, putand acctiona ca un stimulent pentru falimente oportuniste si alte forme de hazard moral.”

Romania 'BBB-/A-3' Ratings Affirmed; Outlook Stable

08-Apr-2016

Overview

Policy uncertainty in Romania is likely to remain elevated in the run-up  to the November general elections, with scope for further deterioration in public finances.

Despite the likely widening of Romania’s fiscal and external deficits, we expect that government and external debt will not rise significantly and  that unpredictability will subside after the elections.

We are therefore affirming our 'BBB-/A-3' ratings on Romania.

The stable outlook reflects the balance between the likelihood of  Romania's twin deficits widening on the one hand, and Romania's modest  government and external debt on the other.

Rating Action

On April 8, 2016, Standard & Poor's Ratings Services affirmed its 'BBB-/A-3' long- and short-term foreign and local currency sovereign credit ratings on  Romania. The outlook is stable.

Rationale

The ratings are supported by Romania's moderate external and fiscal debt amid reasonably firm growth prospects. The ratings are constrained by low GDP per capita (estimated at $9,300 in 2016) relative to peers', alongside procyclical
fiscal policy and Romania's weak governance framework, although we note important efforts to reduce corruption in recent years.

Ahead of the local and general elections to be held in 2016, Romania's previous government, led by the Social Democratic Party (PSD), passed several stimulus measures before stepping down in late 2015. A caretaker technocrat 
government has been appointed until the November parliamentary elections. We believe that this interim government's reliance on the main parliamentary 
parties--including on the PSD--for support makes it harder for it to reverse recent tax cuts and wage hikes.

We expect that the looser fiscal stance will drive fiscal and external deficits higher, but our base-case expectation is 
that these will prove manageable and not return to levels observed before 2008, when general government deficits exceeded 5% of GDP.

Historically, fiscal policy in Romania has been highly procylical, leading to large swings in demand and the performance of public finances. In 2015, Romania's economy grew by 3.7%, led by domestic demand.

Value-added tax (VAT) cuts and multiple wage hikes have benefitted private consumption, but partly 
at the expense of public investment.

Despite the country's improved absorption of EU funds last year, we estimate that investment in 2016 will still be about 10% below the highs seen before the 2008 global financial crisis.

Another related risk to macroeconomic stability is the possibility that wage growth will outpace productivity gains, leading to a loss of external competitiveness.

We note that labor costs rose by 9% in the fourth quarter of 2015 (according to Eurostat's business economy definition) year on year, more  than in any other country in the EU, albeit from a much lower level.

Wage  growth during that period was particularly high in education (up 20%) and  public administration (13%) as per Eurostat data. We project that wage growth will likely continue during 2016, given the possibility of further relaxation of fiscal policy ahead of the general elections.

After a series of high deficits, which peaked at 9% of GDP in 2009, Romanian policymakers have been consolidating government finances by imposing tough expenditure constraints. We expect this trend to reverse from 2016, with the general government deficit peaking at 3.5% in 2017.

We see several risks to our base-case fiscal forecasts. Pre-election measures could weigh more heavily on the government's finances than we currently expect, not only this year but in subsequent years.

These would be over and above the recent spate of changes
to the fiscal code and wage hikes, the impact of which we include in our  forecast. Because we do not expect a subsequent government will be able to roll back such measures, Romania's path to consolidation from 2018 will likely be only gradual, and conditional on continuing economic recovery in the  private sector.

Given our deficit forecasts, we project that general government debt will reach 43% of GDP in 2019, up from our estimate of about 40% in 2016.

Nearly 60% of gross general government debt is denominated in foreign currency, predominantly euros, indicating some vulnerability to adverse exchange-rate 
movements.

Moreover, the banking system's exposure to the government slightly exceeds 20% of its total assets, which we believe signals reduced ability to increase exposure to the sovereign in times of stress.

Another impact of the stimulus to consumption from the looser fiscal stance is likely to be on Romania's external finances. We project that the current account deficit will widen toward 3.5% of GDP in 2019 from 1.1% in 2015.

The external deficit could be larger if fiscal policy is relaxed further or the country's export competitiveness suffers from rising wages.

Nevertheless, we believe that an improvement in energy efficiency and gradually increasing value-added in some pockets of Romania's expanding export sector (especially 
services) are likely to prevent large external imbalances from re-emerging. 

The services sector's surplus exceeded 4% of GDP in 2015 versus 1% in 2010, attributable to growth in the information technology and transportation 
industries. We anticipate that, from 2018 onward, Romania's current account  deficit will be fully financed by surpluses on the capital and financial accounts.

We think the latter will benefit from continuing foreign direct investment, public-sector borrowing, and slowing net outflows from the financial sector as domestic lending opportunities increase.

We expect deflation, prompted by cuts in indirect taxes, will persist until the middle of 2016. With very strong domestic demand, there is a risk that inflationary pressures could build rapidly, once the effect of the VAT cuts 
fades. We also note the brisk pace of bank lending to households in 2016, with mortgage loans in February increasing 16% year on year.

In contrast, growth of lending to corporate entities has been much slower at 2.5%. With most new  lending in local currency, outstanding loans denominated in foreign currency, particularly euros, continue to decline, reaching less than 50% of the total loan book.

We believe that, if this trend continues, it is likely to improve  the transmission of monetary policy over time while reducing the domestic economy's vulnerability to exchange rate fluctuations.

Downside risks to our forecasts could also stem from legislation, which, if applied retroactively, could worsen financing conditions for Romania's private sector. An example is a proposed law on debt discharge, which, in our opinion, could undermine the recent stabilization of real estate values, slow the recovery of lending growth, and even potentially discourage foreign investment
in the nonfinancial sector.

As we understand it, the aim of the proposed law 
is to improve debtors' negotiating powers with financial institutions and it would give them the right to discharge debt by transferring the title over  mortgaged immovable property to creditors, without entitling creditors to a 
claim on other personal assets.

In this respect, the proposed law appears to us to depart from personal bankruptcy procedures in other jurisdictions, and it could act as a potential incentive to opportunistic default and other forms of moral hazard.

Outlook

The stable outlook reflects the balance between the likelihood of Romania's  twin deficits widening on the one hand, and its modest government and external
debt on the other.

We could raise the ratings if Romania's budgetary consolidation resumes and net general government debt is firmly on a downward trajectory, and public enterprise restructuring is implemented successfully.

We could lower the ratings on Romania if any of the following scenarios were to materialize:

We believed policy reversals could cause general government deficits and  debt to increase significantly more than we currently expect,

Romania's external imbalances re-emerged,

The stability of Romania's financial sector weakened, or

Policy reversals had a greater and more lasting effect on the  macroeconomic environment than we currently anticipate.