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

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