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. What was the reason behind this? The same foreign deficit that agency analysts believe has risen to levels "that look disconcertingly stretched by current global or historical standards." As a result, Romania is put in the same bracket as Bulgaria, Latvia and Estonia.
In the past, Fitch provided the most balanced assessments of Romania, and was at the forefront of rating upgrades. 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," comments Liliana Solomon, CEO of Vodafone Romania.
NBR Governor Mugur Isarescu says there is not a crisis in Romania, not even a foreign exchange one.
"The RON is on the rebound. The climate is not perfect, but we do not have a foreign exchange crisis. What is happening is absolutely normal: a relatively painful rebalancing process," NBR's head commented the day before Fitch announced a downgrade of Romania's rating outlook.
What will the exchange rate do next? "It will probably fluctuate within certain limits," Isarescu says.
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.
"We are at the beginning of a crisis but the stock exchange is slower to react here, because it is smaller. It is obvious that those with a grasp of the macroeconomic indicators have already sent out warnings as early as the end of last year," says Mihai Coca-Cozma, CEO of AIG Fond de Pensii. He says that the lack of response on the part of the authorities shows that either they do understand what is going on, or they are clueless about what to do given the onset of a crisis, and also because of the imminent start of an electoral campaign.
Jan Pricop, deputy general manager of KD Investments says it was also the international context, too that got us into this situation, not only what is happening in Romania. "We weren't spared last year, either, when it comes to the stock market. We had come close to a 40% yield, wherefrom we went down to 29%. The decline is significant and it will probably not be easy for the stock exchange to catch up and get back to where it was last year. It will take more than a year."
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