The bourse and leu drop following Fitch downgrading of Romania’s outlook

The bourse and leu dropped yesterday following an announcement by leading global rating agency, Fitch Ratings, that it is changing Romania’s outlooks. Fitch revised Romania’s outlooks downward to negative from stable for long-term foreign and local currency issuer default ratings (IDR). The agency’s analysts confirmed the “BBB” rating for long-term foreign currency and “BBB+” for long-term local currency IDRs. Nevertheless, while the rating agency confirmed its ratings, it modified their outlooks from “stable” to “negative.” The downward change in outlook shows that there is potential for the rating to be revised to negative.

The reason for these revisions is the widening current account deficit, one of the highest in the world. According to Fitch, “Romania’s current account deficit is estimated at 14 percent of gross domestic product (GDP) in 2007.”

The worsening of certain macroeconomic indicators was also signaled yesterday by Mugur Isarescu, National Bank of Romania (BNR) Governor. Isarescu referred to inflation and declared that BNR had taken the necessary measures to maintain inflation within the target set for this year (3.8 percent +/-1 percent).