Romania’s public debt nears 50% of GDP after April Eurobond issue

Romania’s public debt nears 50% of GDP after April Eurobond issue
By bne IntelliNews June 30, 2021

Romania’s public debt increased to RON526.6bn (€107.5bn) at the end of April, close to the 50% of GDP estimated for 2021, after the government placed €3.5bn of Eurobonds on April 7.

Public debt as a percentage of GDP will reach approximately 54% in a horizon of 12 months, according to the latest poll of members of the CFA Romania Association, carried out in June. 

In April, Fitch forecast the public deficit of Romania to reach 6.6% of GDP in 2022, consistent with the ratio of public debt to GDP increasing to 53.2% at the end of 2022 from 47.3% at the end of 2020.

Romania’s debt leapt by RON20bn in April alone and the debt-to-GDP ratio edged by 1.9pp.

Compared to the end of 2020, Romania’s debt advanced by RON27.5bn and the debt-to-GDP ratio by 2.6pp.

Over the previous year, public indebtedness soared by RON125.6bn and the debt-to-GDP ratio deteriorated significantly by 12pp to 47.3% at the end of the year.

Speaking about public borrowing — which the opposition Social Democrats argue will further increase the burden on future generations — Prime Minister Florin Citu stated that “the debts are only for profitable investments”.

Romania’s external debt will increase by another €16bn as a result of the Resilience Plan alone in the years until 2026.

Separately, fiscal consolidation is supposed to ease the pressure placed on public debt by the fiscal deficit. The public budget gap is supposed to drop under 3% of GDP by 2024, but this year it is still planned to stand at over 7% of GDP — possibly to be revised downwards amid stronger than anticipated GDP growth in the year.