August 3, 2020

S&P downgrades Romania's "stable" to "negative"

The Standard & Poor's (S&P) rating agency has lowered the Romanian economy's perspective from "stable" to "negative" by considering that the pension and salary increase planned for 2020 may cause an additional increase in external and fiscal deficits.

"Although we hope to see fiscal consolidation begin next year, rigid budgetary structure and volatile policies remain a risk," the agency said in a statement, quoted Wednesday by the Romanian economic information newspaper Ziarul Financing.

The increases in pensions and salaries against which S&P warns were approved by the former Government of the Social Democratic Party (PSD), which was overthrown in a motion of censure last October.

Despite having budgetary stability among the priorities of his speech, the successor Executive, formed by the National Liberal Party (NLP), has promised that he will not review the approved increases, and that salaries and pensions will continue to grow.

"We believe that the political and volatile policies will constrain this government when it comes to offering reliable fiscal consolidation before next year's general elections," warns S&P, which considers the executive unlikely to take unpopular measures such as freezing salaries and pensions in election year.

Romania will hold legislative elections at the latest in December 2020, and it is expected that before, in June, it will go to municipal elections.

The NLP Government, which has accused the Social Democrats of hiding the magnitude of the deficit, expects Romania to close 2019 with a public deficit of 4.3% of gross domestic product (GDP), 1.3 points above the ceiling of 3 % established by the countries of the European Union in the Maastricht Treaty.

. (tagsToTranslate) SP (t) stable (t) negative (t) perspective (t) Romania

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