Moldova's "B-" credit rating may be threatened if political unrest in the country persists but the fallout to the rest of the region appears to be contained for now, Fitch Ratings said on Wednesday.
"There's already a fair bit of political risk built into Moldova's "B-" rating but if the unrest is prolonged and severe and impacts the economy, we would expect to take some ratings action," said Edward Parker, Head of Emerging Europe Sovereigns at Fitch Ratings.
Moldovan riot police regained control of presidential offices and parliament, ransacked in anti-government riots that broke out following Sunday elections that returned the ruling Communists to power.
Fitch cut the outlook on Moldova's long-term foreign and local currency issuer default ratings to "stable" from "positive" in September, citing a deterioration in Moldova's external finances and continued inflationary pressures.
"(The protests) may increase regional tensions but whether it will ratchet them up to something more serious remains to be seen," said Parker, noting that the issue over the breakaway Russian-speaking province Transdniestria was not an immediate focus of the protests.
Most of Moldova was formerly part of Romania and the country is divided between those who want to continue as an independent state in a region which Russia regards as part of its sphere of influence, and those who want to reunite with Romania.
The global economic slowdown was also contributing to discontent in a country that is seeing a falloff in remittances from Moldovans working abroad, Parker said.
"The worsening economy may have contributed to the social unrest, though the spark was political. Like other countries, Moldova is suffering from the global slowdown which is hitting public finances and employment," he added.
Moldova has about $12 million outstanding on a sovereign floating rate note (FRN) <MD007625243=RTR> maturing in October.
"Moldova's external debt is fairly high, though not out of line with many small developing economies at about $4 billion or about 70 percent of 2008 GDP," Parker said.
That figure includes private sector debt as well as sovereign debt.
Source: Reuters
