S&P Downgrades Romania’s Rating Outlook from Stable to Negative

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S&P has downgraded Romania’s rating outlook from stable to negative, warning that without additional measures, the deficit will exceed 7.5% of GDP this year, following the adoption of fiscal-budgetary measures included in an emergency ordinance passed at the end of 2024.

The agency notes that implementing these fiscal measures could prove challenging for a newly formed government amid a fragmented political landscape after the cancellation of presidential elections and slower economic growth due to reduced economic activity in Germany and other trade partners.

High pre-election spending pushed the fiscal deficit to nearly 8.7% of GDP, far exceeding the agency’s expectations. This highlights the challenges of containing costs as the economy slows. In the absence of further fiscal decisions, the deficit is expected to remain above 7.5% of GDP this year and decline slightly to below 6% by 2028.

Therefore, we have revised our outlook from stable to negative and affirmed our sovereign credit ratings at BBB-/A-3 for Romania. Without additional measures, we expect deficits to remain above 6% of GDP before 2028, with public debt surpassing 60% of GDP by 2027,” the S&P report states.

The agency could further lower its outlook if government measures and moderate economic growth lead to higher-than-expected fiscal deficits in the medium term. Conversely, in an optimistic scenario, S&P could return to a stable outlook if fiscal and external deficits are significantly reduced.

Tanczos Barna, Minister of Finance, stated that the downgrade is a signal that Romania requires deficit reduction measures, a prudent budget, and a leaner state:
“The measures agreed upon by the government to reduce the budget deficit and strengthen economic growth must be implemented swiftly, as already agreed with our European partners. The 2025 budget, set to be presented to the government and submitted to Parliament for approval in the coming days, reinforces this prudent vision of managing public funds.”

In mid-December, Fitch also revised Romania’s economic outlook from stable to negative, citing political risks from the cancellation of presidential elections and a divided parliament that raises concerns about the sustainability of the pro-European governing coalition.

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1 Comment
  1. Panagiotis Spyridis says

    Do not blink the eyes… you still have one off the (extremely lowest) public deficit % in the entire world!

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