The autumn analysis conducted by international rating agencies Moody's and Fitch IBCA did not bring anything new as concerns Romania, as the rating perspective remained "stable," but the two agencies, as well as Standard&Poor's, say that they are eyeing the economic influences of the oil price increase over the current account deficit, the evolution of the banking system and the political influences over the economic sector after the November elections.
Konrad Reuss, a manager with Standard&Poor's country rating division, stated that he was waiting to see the way in which the oil price increase and the possible decrease of exports to the euro zone countries over the following months will be reflected by the evolution of the current account.
According to Romanian authorities, the crude oil price increase will trigger a 150 million dollars increase of the current account deficit.
"We have not evaluated yet the consequences triggered by exports' reduction to European Union countries," said Sorin Potanc, a state secretary with the Industry and Trade Ministry.
Sebastian Vladescu, a state secretary with the Finance Ministry, stated that the Government did not envisage the reduction of fuel taxes following the increase of crude oil price.
"As the euro started to appreciate against the dollar, we hope to avoid big problems related to the current account deficit, as far as exports are concerned," says Vladescu.
Fitch IBCA expressed dissatisfaction regarding the evolution of the fiscal domain, deemed as "less impressive."
"The progress posted in downsizing state budget arrears was bellow expectations and authorities revised their fiscal deficit target, pushing it up to 3.5% of the GDP," stated Sharon Leech.
Sharon Leech, an analyst for Romania with the European rating agency Fitch IBCA, said that perspectives of improving Romania's ratings "are still affected by the fact that the current administration is about to lose the elections."
"Consequently, as the most likely result of the elections is a coalition led by PDSR, we should not rule out the risk of further delays in structural reform and fiscal consolidation," the Fitch IBCA report reads.
Pavel Simacek from Moody's believes that Romania's recovery is expected to remain modest for some time "because the implementation of necessary reforms and privatisation is a stop-and-go process."
"Romanian banks will not see increases in the short and medium term because their returns are limited by the numerous bad loans," reads Moody's report on the Romanian banking system. Moody's is concerned about the numerous bad assets of banks, especially as there are little chances for most of these assets to be recouped.
The elections scheduled for November 2000 and the way the new government will approach the process of restructuring and privatisation in the financial sector will be another decisive factor for the future development of the banking system.
"The actions to be taken by the future government in this field will have a long-term effect on banking ratings. The banking sector continues to be very concentrated, the state-owned banks accounting for more than one third of the banking activity," Simicek added.
He believes that the weight of state-run banks will drop in the future, as more dynamic competitors from the private sector and strategic investors enter the market.
"We believe that the pace and consistence of reform will largely depend upon the political climate in the country. So far, the privatisation process has been very slow. The outcome of November elections will largely influence the privatisation process," the Moody's analyst explained.
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