Cristian Popa, NBR: S&P's decision, difficult to anticipate

Standard & Poor’s decision to downgrade Romania’s rating was difficult to anticipate, as the economy in its entirety is no more vulnerable than the economies of comparable countries, the vice-governor of the National Bank of Romania, Cristian Popa said yesterday.

The financial rating agency on Monday lowered Romania’s rating for long-term foreign currency sovereign loans to BB plus from BBB minus and the short-term credit rating to B from A minus; the rating outlook in both cases was negative, as a result of the risks arising from the high need for financing from international credit markets. The decision relegates Romania from the investment grade category, forcing it, as analysts say, to apply a stricter fiscal and salary policy and steps to support the business environment and to continue to attract foreign investment. “I find it very hard to understand why Romania was the first step of a rating outlook downgrade for the countries in the region (…). I believe Romania had positive things, which were not included in S&P’s analysis,” the NBR vice-governor said. He talked about all the issues raised by the rating agency one by one and explained that although much of the criticism can be found in the what the central bank says, too, a series of positive elements were not included. Popa reiterated that the rating of a country first of all refers to its capacity to pay its debt, explaining the S&P analysis did not make any reference to this and merely pointed out the impact on the economy if foreign financing ceased to come. “I would like to mention what the S&P analysts did not say. We estimate Romania’s public debt at 12% of GDP until the end of the year, which is even lower than last year,” Popa stated. As for the private foreign debt, the official of the central bank said the trend had slowed down significantly from 60% last year to 30% for long-term financing and 6% for short-term financing this year. Moreover the national bank’s reserve covers 92.4% of the debt stock. Popa also talked about the high current account deficit referred to by the rating agency, explaining it had narrowed in the first eight months. He reiterated that the central bank did not want an abrupt correction of the current account deficit.