Moody's Leaves Romania, Bulgaria Ratings At Investment Grade
Last update: 3/20/2009 8:23:02 AM
DOW JONES NEWSWIRES
Moody's Investors Service kept its ratings for Romania and Bulgaria at investment grade, though just one notch above junk, a week after saying a report that the two countries were among those in Eastern Europe at particular risk for downgrade.
Investors have punished financial assets around emerging Europe, citing persistent current-account deficits and the need to refinance large amounts of short-term loans, as wealthier economies are retrenching.
The ratings agency affirmed the Baa3 ratings and left their outlook at stable for both governments of the former Soviet Bloc nations.
But Moody's said it expects Romania's economy to contract and Bulgaria's to experience a "difficult" time in 2009 as exports are slowed by the recession in Western and Central Europe, and as foreign capital inflows slow.
Senior analyst Kenneth Orchard said Romania's status as an investment-grade country "is supported by the government's moderate debt burden." However, it has become vulnerable in recent years due to the rapid growth of domestic credit, fuelled by capital inflows, he said.
"In addition, due to rather lax fiscal policy through the boom years, the government was in a weak position going into the global economic crisis," Orchard said. "The problem was exacerbated by a surge in spending associated with the national elections in November."
Orchard said the combination of shrinking exports and slowing foreign capital inflows will likely force a sharp reduction in Romania's current-account deficit, which will lead to rising unemployment and weak government revenue.
Although Bulgaria also faces a challenging year, it is "well positioned to cope" with the situation, because of "many years of prudent fiscal policy and low debt," Orchard said.
-By Mike Barris, Dow Jones Newswires; 201-938-5658; mike.barris@dowjones.com
(END) Dow Jones Newswires
March 20, 2009 08:23 ET (12:23 GMT) |
