Citigroup analysts believe the country’s budget deficit could fall below 6% of GDP this year based solely on measures already adopted for 2026, including expenditure cuts and revenue increases, according to notes published after meetings in Romania, cited by Economedia.

Citi assumes last year’s budget deficit at 7.7% of GDP under the cash definition and 8.0% of GDP under the ESA methodology. Under this baseline, analysts see scope for a stronger-than-expected fiscal adjustment in 2026, with several macro indicators improving in parallel.

Key Citi expectations include:

• Public deficit potentially falling below 6% of GDP this year, from 7.7% in 2025 (8.0% under ESA).

• Current account deficit narrowing to around 7.0% of GDP, from an estimated 7.8% in 2025, mainly due to weaker imports amid shrinking domestic demand.

• Headline inflation easing to 3.7% y/y by year-end, although risks remain tilted to the upside.

• Exchange rate remaining broadly stable, despite some concern over real effective exchange rate (REER) appreciation.

Citigroup also expects the ruling coalition to remain intact, largely due to the absence of viable political alternatives. For the Social Democratic Party (PSD), incentives are created by the agreed transfer of the prime ministership in April 2027, while on the side of Prime Minister Ilie Bolojan, resignation rhetoric is seen as a tactical political tool rather than a real risk to stability.

On the external sector, Citi analysts expect most of the adjustment in the current account deficit to come from lower imports, while exports should remain broadly stable. Although REER appreciation is monitored closely, it is not yet seen as a material threat to export competitiveness.

“While the appreciation of the real effective exchange rate remains a concern, we do not yet see it having a significant impact on export performance — a view reinforced in our meetings,” the analysts noted. “Overall, and given our expectations that the National Bank of Romania (BNR) will continue to focus on containing inflationary pressures, we continue to see the currency as broadly stable.”

On monetary policy, Citi’s meetings reinforced the view that the BNR will remain cautious and is unlikely to cut interest rates before the summer. In a scenario where inflation surprises on the upside, the start of the easing cycle could even be postponed until October.

Citigroup keeps Romanian government bonds (ROMGBs) at a constant weight in its model portfolio and continues to view them as an attractive carry trade, supported by relatively strong economic fundamentals and expectations of exchange rate stability.