Moody's Verdict Crucial for Romania's Economy, Economist Explains Rating Agencies

Romania's economic future hinges significantly on the upcoming verdict from the credit rating agency Moody's, which could shape investor confidence and the nation's financial trajectory. Economist Daniel Dăianu provided insights into the workings of these influential agencies during an interview, detailing the criteria they scrutinize and the potential ramifications of any rating change.

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Unfortunately, this situation reveals major shortcomings in public governance: lack of clarity, short-sightedness, and the inability to address structural problems.

Dăianu addressed the current challenges facing Romania, including vulnerabilities exposed by the Danube's low water levels, which he attributed to major shortcomings in public governance. He criticized a historical lack of foresight and an inability to tackle structural problems by successive governments, who often focused on minor issues. The current government is now compelled to implement extreme measures, such as restricting industrial activities, to protect the population and ensure energy system functionality.

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Fitch did not do Romania any favors. Rating agencies have an obligation to investors and must provide credible evaluations, because investor decisions depend on them.

Addressing the role of rating agencies, Dăianu clarified that Fitch's recent decision to maintain Romania's rating was not a "favor" but a professional assessment based on credible information. He stressed that agencies like Fitch and Moody's have an obligation to provide accurate evaluations to investors, as these ratings directly influence decisions regarding sovereign and corporate bonds. While acknowledging past errors by major agencies, Dăianu highlighted their strong focus on reputational risk.

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Moody's conducts its own analysis and does not copy Fitch's decision.

Regarding Moody's impending decision, Dăianu stated that the agency conducts its own independent analysis and does not simply mirror Fitch's conclusions. However, he noted that Fitch's assessment sets a precedent, considering Romania's difficult recovery context. He pointed to the ongoing fiscal-budgetary correction, marked by increased tax revenues and controlled expenditures in the first seven months of the year, as evidence of positive movement. Dăianu emphasized that agencies analyze the same data and expect consistency in economic policies, debunking the notion that Moody's is inherently more lenient or severe than Fitch, as all major agencies prioritize prudence and rigor to maintain credibility with investors.

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It is more of a perception than a reality. All major agencies are obliged to be prudent and rigorous. If one of them became more lenient than the others, it would assume an enormous reputational risk.