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Wednesday, September 08, 2004
LONDON, Sept 7 (Reuters) - Ratings agency Standard and Poor's said on Tuesday that Romania's sovereign credit rating has potential to improve in the near-term as long as the country consolidates its progress on structural reform.
"I think rating in the near term has potential to improve," said Konrad Reuss, managing director at S&P told Reuters. "They are making progress on fundamental and structural issues and fiscal policy is well controlled."
But Reuss added: "Romania still has history of progress and then slippage."
S&P has Romania's foreign currency ratings at BB with a positive outlook.
"Romania has to consolidate what it has achieved so far and make more progress on structural issues like wrapping up remaining privatisation and reform of the energy sector," said Reuss.
Market watchers have speculated for the past few weeks that Romania could be in line for a sovereign ratings upgrade after neighbouring Bulgaria was recently awarded an investment grade rating by Fitch and Standard & Poor's.
"The key comparison is indeed Bulgaria. Bulgaria has kind of rating wise left Romania behind. Bulgaria has established a much stronger track record," Reuss said.
S&P and Fitch rate Bulgaria at BBB-minus.
"A two notch rating differential between the two credits (Bulgaria and Romania) is not justified in our view given that both are expected to join the EU together in January 2007," Timothy Ash, emerging Europe economist at Bear Stearns, said in a research note.
Reuss said that next year will be decisive for Romania's sovereign ratings as the market will keep a close watch to see whether it's on track to join European Union in 2007.
A Reuters poll done in August showed that Bulgaria is on target to become a member of EU in 2007 but Romania still has reforms to complete before it can be certain of joining alongside its neighbour.
Posted by Mihai : 9/08/2004 06:08:00 pm
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