The country’s public debt has ballooned considerably in 2020 even though GDP contraction was milder than expected, at just 3.9%.
In the period April 2020 – April 2021, Romania’s government borrowed RON121.5 billion (EUR24.8 billion). In January-April 2021 alone, the government borrowed RON27.5 billion (EUR5.2 billion).
At this rate, newly amassed public debt is set to reach RON110 billion by the end of the year, well above the government’s target of RON85 billion.
Fitch Ratings said in a report recently the trajectory of the country’s debt to GDP ratio was a key factor for determining the direction in which the Rating Outlook will be resolved.
Romania’s ‘BBB-’ rating has been on Negative Outlook since April 2020 reflecting a worsening of fiscal imbalances built up in recent years as a result of pro-cyclical policies, and the impact of the Covid-19 pandemic.
Although the public debt-to-GDP ratio remains below peers, achieving medium-term fiscal stability relies on the implementation of expenditure and revenue reforms necessary to address structural imbalances, Fitch said.