„The Romanian government was able to pass a bill that envisages cutting public-sector wages 25% and reducing pensions and unemployment grants 15% despite the motion filed by the opposition party. These measures will ensure around EUR2 billion in payments from the IMF-EU EUR20 billion support loan,” Moody’s said in its weekly credit outlook report.
According to the ratings agency, the austerity package is likely to further challenge banks’ asset quality and their already „waning” profitability.
„We expect banks to proactively manage credit facilities granted to government employees, mainly through loan restructuring, to minimize the possible effects on bank financial performance,” Moody’s said.
It estimated a growth in non-performing loans in 2010, which in turn will negatively impact on bank’s credit costs.
Moody’s recently revised downward its forecast on Romanian economic growth to minus 0.5% in 2010, partly as a result of the government’s austerity package.
The Romanian government announced a series of measures to slash spending and lower the budget deficit to 6.8% of GDP in 2010, from a gap of 7.4% of GDP last year.
Opposition parties and unionists heavily contested the unpopular measures, and the country’s Constitutional Court is expected to pronounce itself on the package’s constitutionality.