It underscored its baseline forecasts, which underpin the affirmation of our ‘BBB-‘ ratings on Romania, include the government containing the country’s wide twin deficit.
At the same time, the negative outlook reflects the agency’s view that that risks relating to Romania’s public finances will remain high over the next several years, despite the announced consolidation measures.
„The government’s fiscal measures are being undertaken against a challenging macroeconomic backdrop, including from a slowing economy, high and rising inflation, and a high current account (CA) deficit,” reads the agency’s statement.
S&P see risks that economic and political challenges could undermine the government’s ambitious policy agenda, whereas the medium-term fiscal strategy beyond 2026 remains uncertain.
In the agency’s opinion, the proposed fiscal measures will narrow deficits, but also likely contribute to a slowing economy. Positively, the new government’s fiscal correction and reform agenda will help unlock EU funds.
According to S&P, growth has slowed considerably since last year and the consolidation measures will weigh further on the economy. The agency lowered its projections of GDP growth to 0.3% in 2025 and 1.3% in 2026.
The agency expects CA deficits to remain wide and fiscal tightening to only partially reduce these to 7.5% of GDP on average through 2028.
The agency underscored that The election of Nicosur Dan as president in mid-May, followed by the formation of a new government under Prime Minister Ilie-Gavril Bolojan, has ended a prolonged period of political and policy uncertainty in Romania.
The overall fiscal impact of the measures is 1.1% of GDP in 2025 and a sizable 3.5% of GDP in 2026, relatively evenly split between measures related to revenue and spending.
„In our view–and considering the second-round effects on the economy–this will help reduce deficits to below 7.7% of GDP this year and to 6.4% in 2026, from 9.3% of GDP in 2024, which was the highest level since 2009. We also understand the government plans to adopt further measures in the form of two additional reform packages in the next few months, which could result in additional fiscal consolidation, even if to a smaller degree than the already legislated initiatives,” according to the agency.
S&P considers that the fiscal correction–as well as more stringent reform efforts along the lines of the country’s Recovery and Resilience Plan (RRP)–will help speed up EU funds flowing toward Romania.
Romania is still entitled to almost €18 billion, about 5% of estimated 2025 GDP, from the Recovery and Resilience Facility (RRF) by 2026 as well as over €26 billion, or over 7% of GDP, under the EU’s 2021-2027 Multiannual Financial Framework. These funds will support economic growth as well as help finance external deficits over the next few years.
(English version by Catalina Apostoiu)