Fitch will wait for the Romanian crisis to unfold before making a rating call

LONDON, Sept. 8 (Reuters) – Fitch will wait until Romania’s current political crisis is resolved before deciding whether to maintain or withdraw its investment grade credit rating, the company’s analyst for the country said on Wednesday.

USR-Plus’s junior partner in Romania’s centrist coalition government withdrew its cabinet ministers from the country on Tuesday, paving the way for a parliamentary vote of no-confidence against liberal Prime Minister Florin Citu.

The split in the tripartite coalition, which includes Romania’s largest party, liberals from Citu, a Hungarian ethnic group and the USR-Plus, could endanger ambitious plans to reduce the state’s yawning budget deficit from the Black Sea.

“There are multiple consequences of this political crisis,” said Federico Barriga Salazar, Fitch sovereign analyst for Romania, in a webinar question-and-answer session.

The main risk for the BBB- rating, which is the lowest in the investment grade and which is subject to a downgrade warning, is that the situation derails, repairs the country’s finances and further increases public debt.

“We’ll have to take a little time and see how it plays out… but I think where we’re placed with a negative outlook somehow encompasses that balance of risks relatively well at the moment,” Barriga Salazar said.

“So we’ll just have to carry on for a bit and wait for the political dust to settle. “

Being stripped of a prime credit rating can drive up a country’s borrowing costs, as international investors tend to view junk-rated countries as riskier.

Romania’s debt-to-GDP ratio rose to almost 55% from around 35% in 2017 and last year it had one of the largest budget deficits of the 27 members of the European Union at 9 , 3%.

Economists expected the economy to rebound around 5% this year and remain strong, supported by a multi-year infrastructure plan. Earlier this year, another rating firm, S&P Global, withdrew the country from its own downgrade warning. (Reporting by Marc Jones Editing by Chris Reese)


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