Romania’s public debt under the European Union’s ESA methodology stagnated in local currency terms during Q1 and hit RON301bn (€64.7bn) at the end of March, the finance ministry announced.

This came despite the significant RON4.45bn (€1bn, 0.5% of GDP) general government deficit in the quarter, indicating that a certain depletion of the government’s buffer took place. A similar development, namely softer borrowing compared to the budget financing needs, was noticed over the past year and it partly offsets the improvement in the indebtedness as shown by the debt-to-GDP ratio (that remains robust, though, despite the corrections for the depletion of government's buffer).

The recent improvement in the country’s headline ESA indebtedness ratio offset concerns related to imminent fiscal slippage and economic slowdown, but this might be misleading and could be reversed during the coming quarters.

The public debt dropped to 34.6% of GDP (latest four quarters’ GDP) at the end of March, down from 35% at the end of 2017 and 37.1% at the end of March 2017. The 2.5pp drop in the debt-to-GDP ratio over the past year was caused by the rise in the nominal GDP , but the softer borrowing compared to the budget deficit’s financing needs contributed as well. This must have evaporated a relevant part of finance ministry’s buffer. 

Versus March 2017, the country’s public debt edged up by a mere RON12.2bn (1.4% of GDP, half of last year’s budget deficit gap) but only by €1.16bn when including the exchange rate effects of the local currency’s weakening.

ESA Public Debt	Dec-08	Dec-09	Dec-10	Dec-11	Dec-12	Dec-13	Dec-14	Dec-15	Dec-16	Mar-17	Dec-17	Mar-18
Debt RON mn	69,020	118,428	159,687	193,217	221,873	240,777	263,153	270,077	285,995	289,231	300,777	301,434
- domestic	27,809	60,986	81,931	98,164	108,503	108,738	124,936	135,674	147,692	149,749	154,767	153,330
- external	41,212	57,443	77,756	95,053	113,370	132,039	138,218	134,403	138,303	139,482	144,261	142,937
Debt € mn	17,319	28,009	37,268	44,729	50,099	53,689	58,712	59,692	62,979	63,552	64,549	64,719
Debt to GDP	13.2%	23.2%	29.9%	34.2%	37.3%	37.8%	39.4%	37.9%	37.5%	37.1%	35.0%	34.6%
Source: bne IntelliNews