A "hard landing" of the economy could widen Romania’s public debt to U.S. 12.7bn, Moody’s says

Romania must refinance 5.1 billion U.S. dollars from its public debt, in the next year, and in case of a "forced landing" of the economy it could need another 12.7 billion U.S. dollars for the same period, a report by Moody’s shows.

The rating agency take into account two scenarios: a moderate one, in which the shocks recorded by the Romanian economy would be smaller and a pessimistic view, in which the macroeconomic unbalances could generate a "forced landing" of the economy.

If the first scenario will be seen, the public debt that must be refinanced in the next 12 months will see an additional 8.8 billion U.S. dollars, resulting in 13.9 billion U.S. dollars that should be refinanced in the next year. The sum is the equivalent of 7.5 percent of Romania’s GDP, Moody’s notes.

Nevertheless, the pessimistic scenario refers to another 12.7 billion euros that should add to the existing 5.1 billion euros, resulting in 17.8 billion U.S. dollars and 9.6 percent of the GDP.

These conclusions were presented in Moody’s most recent financial rating report, focusing on the dangers which threat the country ratings of Europe’s emerging countries, in the next 12 to 18 months.

Romania, Hungary face risks as major local investors lack

The economists with Moody’s say the sums estimated for the public debts are not excessive, meaning in most of the cases the involved countries could finance them from the capital markets, yet with larger costs.

Nevertheless, Moody’s says it is difficult to anticipate how capital markets will react to possible crises and it is possible for the required financings to come at a larger price.

The rating agency says the larger economies, such as Romania, Poland, Hungary and the Czech Republic, are exposed to potential higher risks because of the larger financing volumes they would need.

Moody’s specialists see greater risks for Romania and Hungary, as both countries have few local investors, despite being European Union members.

The report puts Romania in the middle group concerning risks for a possible lowering of its rating, together with Poland and Croatia.

All countries in this group risk, in case of a "forced landing", a medium or high increase of the public debt, which could create doubts over the financial stability of their governments, on a long term.

"Hard landing" refers to the possible shocks faced by an economy which recorded for several years a wide current account deficit, associated with a powerful crediting increase, according to Moody’s.

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