S&P Global Ratings revised the outlook on Romania's credit ratings to negative from stable, saying risks to the country's economic and fiscal stability could increase if policymakers fail in their budgetary consolidation efforts.
The rating agency noted that Romanian policymakers are forecasting a budgetary deficit of 4.3% and 3.5% of GDP, for 2019 and 2020 respectively, up from the previously projected deficits of 2.8% and 3.0% of GDP.
The revised deficit forecasts, which partly reflect lowered expectations for revenue growth, are in breach of the European Union's deficit ceiling of 3% of GDP, the rating agency said. It affirmed Romania's long- and short-term foreign- and local-currency sovereign credit ratings at BBB-/A-3.
S&P Global Ratings also said that "there are grounds to question the realism" of the revised budgetary targets over the 2020-2022 period, considering that the government plans to implement further pension hikes from next year.
The rating agency also warned that a slowdown in Romania's economy would impact government revenues and result in further budgetary pressures.
Romania's low economic wealth, relatively average monetary flexibility and unpredictable policy environment are among the constraints to its credit ratings, S&P Global Ratings said.
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