Fitch Downgrades Romania's Rating

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Fitch Downgrades Romania's Rating

Yet another signal that indicates a worsening international perception of Romania: European ratings agency Fitch has announced a revision of its outlook on Romania from stable to negative.

In the past, Fitch provided the most balanced assessments of Romania, and was at the forefront of rating upgrades, ZF.ro reported.

The rating - at least for now, remains at BBB - the highest ever assigned by an agency, which means that even if it were to go down one step, Fitch would still not take Romania out of the low-risk countries in terms of investments.

Fitch is the second rating agency to issue a negative warning about Romania, after Standard&Poor's, last autumn. In S&P's case, a further rating downgrade would lead to an exit from the "investment grade" category.

Fitch's announcement created an immediate impact on the forex market, with rates increasing towards 3.74 RON/EUR, after they fell slightly below 3.70 RON/EUR earlier in the day.

It remains to be seen how long it will take until the financial turbulences extend to the economy, down to consumer demand.

Domestic consumption may be affected by the volatility of the RON and by the fact that people don't know exactly if their costs for loan instalments are to increase - this is the thing everyone wants to make sure they can pay: instalments of bank loans.

If the RON continues to depreciate, it will have a massive impact, especially on salaries, because people will actually have less money in their pockets and their purchasing power will decrease. This will also show in the amount of money people will be willing to spend on telecommunications services.

The latest poll conducted by KPMG shows that multinational companies in Romania are less confident when it comes to their financial situation, keeping the level of investment and recruitment constant. Only 40% of the foreign companies canvassed are optimistic about the future, compared with 65% in the previous quarterly bulletin.

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