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international reserves also declined during the first four months of 2019. The Romanian authorities should be concerned on all these counts, but this has not been the case so far. Under such circumstances, it is very likely that the government will have
to borrow externally, as its relationship with the commercial banks in the country is at a very low level. The ROBOR scandal, to cite just one example, and many other populist measures contributed to this.
Also, as previously signalled, the structure of the Romanian foreign debt by maturities suffered major changes during
the last five years. For instance the share of long term debt decreased from 80.41% as of end-2013 to 67.78% as of end-April 2019, while the share of the short term liabilities increased accordingly during the same period from 19.59%
to 33.22%. This could be risky as the service of the short
term debt tends to be more difficult to anticipate, service and control. Moreover, the news that Romania might consider selling some of its gold (103.3 tonnes as of May 2019), even
if not true, had very negative connotations. A legislative initiative to bring the Romanian gold from London (some 60% of total holdings are deposited with the Bank of England) to Bucharest has unclear status in the Romanian parliament as one of its initiators is now in jail.
Starting from January 1, Romania holds the rotating presidency of the Council of the European Union for six months up to June 30, but the achievements have been
very modest. Also, starting with 2018, a set of measures
to adhere to the euro zone were announced by the Romanian authorities, but unfortunately this process is not driven by the experienced staff of the NBR, as it should have been. The fiscal sector of the country should be put in order first and foremost. All in all, the actions and results so far have not been very encouraging. There is an evident lack of
experienced governmental staff or lack of will to handle such tasks properly.
It is fair to mention that compared with other countries in transition, Romania is not a heavily indebted country. There are various estimations of the increasing ratio of its foreign debt to GDP, with many such ratios being computed to around 50%. However, Ukraine, Moldova, Hungary, Bulgaria, Serbia, the Czech Republic and others have much higher ratios. Nevertheless, the set of immediate measures to be taken by
the Romanian authorities mentioned in the quoted articles (increase exports, develop tourism, attract more foreign direct investment, full absorption of the EU funds, re-develop the industrial and agri-business potential of the country, introduce more favourable treatment of the inflow of remittances, abolish or heavily tax the special pensions, etc.) should be treated as being needed now. All of those proposed measures are more valid than ever, but the focus of the Romanian authorities
has been more on justice and the forthcoming presidential elections than anything else. This is not the right direction
and therefore millions of Romanians are disillusioned with
the current Romanian authorities. Hence the sharp changes
in voting during the European Parliament elections in May 2019. Avoiding unsustainable populist measures and control of foreign debt should be a national priority, but the politicians in power do not want to hear this. Currently they have other priorities which are not in consonance with the will of the electorate, but this will be taxed soon by the voters.
Alexandru M. Tanase is an independent consultant and former associate director, senior banker at the EBRD and former IMF advisor. These are personal views of the author. The assessments and views expressed are not those of the NBR and/or of any other institution quoted. The assessment and data are based on information as of mid-June 2019.
Fitch gives North Macedonia first rating upgrade in 13 years
Valentina Dimitrievska in Skopje
Fitch Ratings upgraded North Macedonia's long-term foreign and local-currency ratings (IDRs) to 'BB+' from 'BB' with stable outlook on June 14.
This is the first time in 13 years that Fitch has upgraded the rating of the country, known as Macedonia until it was renamed North Macedonia under the name deal with Greece in order to solve the long-standing dispute between the two neighbours.
Fitch praised improved governance standards and reforms in the country saying that this provides greater reassurance that
North Macedonia “will not revert to the political paralysis of 2014-2017.”
This "facilitated further progress towards Nato membership and the opening of EU accession negotiations, which support investor confidence and act as policy anchors for sustained reform and macroeconomic stability,” Fitch said.
Fitch forecasts that North Macedonia’s GDP growth will accelerate to 3.4% in 2019 and 3.6% in 2020, from 2.7% in 2018 and just 0.2% in 2017.
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