S & P downgrades Romania, BVB indices plunge

Standard & Poor's rating agency yesterday downgraded Romania on grounds that risks are increasingly high for the country's real economy. The Bucharest Stock Exchange (BVB) had expected the move, with severed indices declining. On the currency market, the leu sharply depreciated minutes after S & P's announcement.

Romania's rating for long-term foreign currency-denominated loans was downgraded to BB+ from BBB-, while the rating for short-term loans dropped to B from A-, both with "negative" perspective.
"The downgrade demonstrates increasing risks for Romania's Real economy, following high vulnerability of the private sector and dependence on foreign financing sources," according to S&P Analyst Marko Mrsnik. Authorities did not try to cope with these challenges as they focused on general elections scheduled for November 30.

According to local analyst Ionut Dumitru, Raiffeisen Romania's Chief Economist, a recent decision to increase salaries of teachers by 50 percent could be the cause of this downgrade. "Foreign investors will be very skeptical following this announcement," he added.

Business Standard