Rating agency Standard & Poor's on Tuesday upgraded its credit rating outlook on the Republic of Romania to stable from negative.

It affirmed its 'BB+/B' long- and short-term foreign currency sovereign credit ratings and its 'BBB-/A-3' long- and short-term local currency sovereign credit ratings on the country.

"The outlook revision reflects our view of Romania's sustained budgetary reform program and our belief that the government is likely to continue to comply with the International Monetary Fund (IMF)/EU standby agreement, hereby easing external financial pressures," said Standard & Poor's Credit Analyst Marko Mrsnik.

But, S&P warned that the ratings could come under pressure if the Romanian government fails to adhere to the economic and fiscal consolidation strategy, up to and beyond the termination of the standby agreement in 2011, or if the private sector's access to external financing worsens, exacerbating the banking system's vulnerabilities.

The rating agency said Romania's gross domestic product is likely to recover slightly in 2010, thanks mainly to an anticipated recovery in external demand. Domestic demand is likely to remain subdued. GDP contracted about 7.1% in 2009.