Moody’s Investors Service said that it has changed the rating outlook on Romania’s Baa3 local- and foreign-currency government bond ratings to negative from stable. The Baa3 ratings themselves as well as the prime-3 ratings on the government’s short-term local and foreign currency debt remain unchanged.
The credit ratings agency (CRA) added that its decision to change the outlook to negative was driven by the following factors:
• Romania’s ties to the euro area through trade, investment and financial channels are heightening the economy’s susceptibility to event risk over the next 12-18 months.
• Given the country’s relatively high level of foreign-currency debt and its significant annual external debt repayment obligations, any worsening in euro area financial conditions would increase risks related to Romania’s balance-of-payments position and its banking system.
Concurrently, Moody’s said that it had also adjusted Romania’s long term local currency bond and deposit ceilings to A3 from Aa3, the long-term foreign currency bond ceiling to A3 from A1 and the short-term foreign currency bond ceiling to P-2 from P-1 to better capture the country’s external vulnerability risk and the default correlation between the government and private-sector borrowers. The long-term and short-term foreign currency bank deposit ceilings remain unchanged at Baa3 and P-3, respectively.
CETA requires the support of all 28 EU nations before it can be approved.
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The country is expected to survive the review, which it must do to retain its place in the European Central Bank’s asset purchase programme.