Fiscal easing is risky for macroeconomic stability

Fitch Ratings on Friday confirmed Romania's rating for long-term foreign currency and local currency debt at BBB-, with a stable outlook, but warned that fiscal loosening is risky for macroeconomic stability, according to News .ro

The investment rating of Romania is supported by the moderate level of public debt, GDP per capita and governance ratios that correspond to those of other BBB rated countries. However, pro-cyclical fiscal easing … is risky for macroeconomic stability, "said a statement from the Financial Assessment Agency.

The Romanian economy stagnated at first quarter of 2018, at a quarterly rate of 4.2%, compared to 6.6% in the last quarter of 2017. Economic growth spurred by rapidly rising wages and tax cuts began to slow, in line with expectations As a result, the agency has maintained its economic growth projection at 3.8% in 2018 and 3.3% in 2019.

With strong growth in the first quarter, a confidence in the economy is expected. economy down, monetary policy tightening stronger inflationary pressures and new external uncertainties, there is the risk of a slowdown in the hard landing

The balance between the fiscal policy and macroeconomic stability e risk of being difficult for the government. Expansionary fiscal policy has weakened public finances. Although Romania has kept the budget deficit below the Maastricht Treaty ceiling of 3% of GDP (2.9% in 2017), which constitutes a strong anchor for the government, it has done so because of the strong growth and reduced investment. Fitch believes that this is not sustainable and predicts that Romania's budget deficit will increase to 3.4% in 2018 and 3.6% in 2019 .

The government's target is a budget deficit of 2, 96% in 2018, based on economic growth of 5.5%

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