Economist Adrian Negrescu warns that Romania’s downgrade in rating is pushing the country into the arms of the IMF, in an already very difficult economic context.
He hopes that politicians „will treat with all seriousness the political instability highlighted by the Fitch rating agency,” which revised Romania’s long-term IDR outlook from stable to negative on Tuesday, confirming the IDR at ‘BBB-.’
"Fitch's decision represents a significant blow to Romania's credibility, in an already very difficult economic context.
Romania is achieving, this year, a series of negative financial records (the largest budget deficit in history, the largest public loan ever made, the largest public debt in history) – which were already raising many questions, concerns among investors.
The political instability highlighted by Fitch is hoped to be treated with all seriousness by politicians, the construction of a stable government and a solid governance program being essential for maintaining the rating above the junk level (not recommended for investments) that we are heading towards," said economist Adrian Negrescu.
He hopes that politicians, "at the 11th hour," will understand that controversial messages such as "introducing a progressive tax on large fortunes" along with "maintaining the flat tax rate" demonstrate "a glaring lack of professionalism and, above all, astonishing recklessness regarding the impact of the proposed measures and fiscal policy.
"The rating depreciation will affect us all directly"
"As we are already witnessing, as also affirmed by the National Bank of Romania, capital outflows from Romania, and the 10-year bond yield has risen to 7.25%, the highest level in the region.
Without a coherent reform plan, with a well-defined timeline, without reassuring investors about maintaining the current tax levels, I am afraid that the path to junk is getting shorter," says Adrian Negrescu.
The economist believes that, beyond politics, "the rating depreciation will affect all Romanians directly," as the interest rates at which the population and companies borrow "will remain at a level double that of the European average," and inflation "will continue to be at a record level," because "the money coming into the country will be even more expensive than at present."
"With money costs double that of Bulgaria, Poland, Czech Republic, not to mention Western countries, the Romanian economy will hardly achieve the economic growth we desire.
If solutions are not found to the budget crisis, the path to the lifebuoy from the IMF will be almost certain. A loan of 40-50 billion euros accompanied, of course, by much harsher austerity measures, will become a reality in 2025," economist Adrian Negrescu added.