International rating agency S&P on July 24 affirmed its BBB- rating for Romania and the negative outlook as well, in a research update issued on July 24, ahead of schedule in response to the government’s fiscal consolidation measures. The rating agency had revised its outlook on Romania to negative from stable on January 24 amid fiscal slippage and uncertain consolidation measures amid political fragmentation.

The rating action eases concerns about a possible downgrade avoided in the last minute by the fiscal corrective package enacted in July, but the outlook remains negative and the rating agency attach to the fiscal projections (sufficient to meet the planned consolidation trajectory) potentially larger-than-envisaged second-round effects, uncertain effectiveness of the fiscal corrective measures (based on past experiences) and ongoing execution risks, especially regarding some of the measures that take effect in 2026.

Politically, the election of Nicusor Dan as president in mid-May, followed by the formation of a new government under Bolojan, has ended a prolonged period of political and policy uncertainty in Romania, the rating agency noted.

However, the fiscal outlook beyond 2027 when the Social Democratic Party (PSD) is supposed to replace Liberal (PNL) Prime Minister Ilie Bolojan under a power-sharing agreement, remains uncertain, S&P stressed. 

Economically, S&P said that the recently announced fiscal correction measures aim to narrow Romania’s general government deficits this year and next, from a very high 9.3% of GDP in 2024. 

S&P estimates the fiscal impact of the measures already legislated at 1.1% of GDP this year (and a sizable 3.5% of GDP in 2026), significantly different from the 0.6% of GDP impact estimated by the government in the substantiation note attached to the measures legislated (the measures were slightly amended in parliament, yet not by a magnitude that could explain this discrepancy). The Fiscal Council upholds the government’s estimate of the impact of the legislated measures at 0.6% of GDP this year and 3.3% of GDP in 2026. In a press conference this week, government spokesperson Ioana Dogioiu stated that a revised estimate of the impact would be released soon. 

S&P assumes 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. The macroeconomic projections do not include the (supposedly milder) effects of further fiscal corrective steps expected in the coming months.

S&P expects the legislated measures to suffice in narrowing the fiscal deficit to 7.7% of GDP this year and to 6.4% of GDP in 2026, meaning Romania would return to the planned fiscal consolidation trajectory in 2026.

The macroeconomic scenario sketched by S&P includes a gradual reduction in Romania’s current account (CA) deficit to 7.5% of GDP on average between 2025-2028, from 8.4% of GDP in 2024, but also significant negative impact of the fiscal measures on the economic growth expected at only 0.3% this year and 1.3% in 2026.