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.
S&P’s decision came after a red day on BVB, with sharp declines of indexes. “Such losses are recovered in three to five years,” the President of KTD Invest broker, Iulian Panait, said yesterday, as the decline of the BVB indexes plummeted 70-90 percent since the beginning of 2007.
The BET index, which monitors the top 10 companies in terms of liquidity, lost 70 percent this year, while the BET-FI index of financial investment companies dropped by as much as 90 percent.
The largest companies listed on the stock market, Petrom oil group, owned by Austrian OMV group, and lender Banca Romana de Dezvoltare-Groupe Societe Generale (BRD-SocGen), each lost 75 percent of their capitalization, a total €10 billion in market value this year.
Yesterday’s trading session began with losses approaching 15 percent in the first half hour, leading to the third session suspension this month. The session resumed and quotations revived slightly. However, the BET and BET-FI indexes plunged back to 2004 levels.
