Investors attending ARIR event: the country’s rating should be Romania’s main financial concern

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The Romanian Investor Relations Association (ARIR) invited top specialists from the Romanian financial market to discuss the financial markets evolutions and the recovery perspective. The first conclusions of the monthly event “Market sentiment – April” joined by the representatives of the National Bank of Romania, BCR Pensii, BRD, BRD Asset Management and WOOD & Company are that the return of markets in April was faster than during other crisis situations. Uncertainty remains the keyword and the long-term recovery outlook depends on the economic measures to be adopted.

Cristian Popa, CFA, Member of the Board, BNR:We must be very careful when talking about Romania’s sovereign rating. The rating agencies want to see discipline and caution. Therefore, it is necessary to surprise in a positive way, so that we do not get downgraded. The country’s budget has a structural problem. Romania paid 1.2% of GDP interests last year, the rest being primary deficit; this year will be significantly higher. The fiscal space was already very reduced before the pandemic due to pro-cyclical policies and the state cannot borrow without limit. Public debt will rise sharply this year and next year as well. It will most likely exceed 50% of GDP in the coming years, coming from 35% now. It is not a very high figure, but, in the current budgetary context, it is not small. It is, however, a good time for state reform.”

Mihai Purcărea, CFA, CEO BRD Asset Management: “It is essential during these times to have the state supporting the economy and the access to finance to remain as cheap as possible. Romania has another financial problem. For government bonds in euros, there is no last resort buyer, as it is the National Bank of Romania for the ones in lei. This is why our bonds are trading significantly more expensive than those of Italy or other countries in the region. This will be a real problem for financing the budget deficit at reasonable costs, especially when the state has significant financing needs, such as this year.”

Daniela Șerban, ARIR President & Co-founder:We have seen so far the review of the rating perspective for Romania from all 3 agencies, from stable to negative. Rating agencies and investors are keeping an eye on our country and on the measures taken by the Government to manage the decrease in GDP, the decrease in revenues and the increase in budget expenditures. Pension reform and a fiscal policy to stabilize the budget deficit can save us from lowering our country’s rating.”

Ștefan Lungu, CFA, Equity Analist Wood&Co: “The three most important rating agencies are looking at Romania carefully, with the probability of reducing the rating, which would mean that some investors will no longer be able to invest in Romanian sovereign debt. It will all depend on future fiscal plans, not necessarily on what is happening this year. If the expenses that cannot be easily adjusted will increase – such as pensions and salaries, then we could see a negative decision from the rating agencies.”

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