Investing.com — S&P Global Ratings has affirmed Romania’s long- and short-term sovereign credit ratings at ‘BBB-/A-3’, maintaining a negative outlook as ongoing political instability threatens the country’s fiscal trajectory. The decision reflects heightened implementation risks surrounding deficit reduction and external balance sheets, even as near-term fiscal consolidation remains surprisingly on track.
Despite political deadlock following the collapse of the coalition government in May, Romanian authorities managed to pass ad-hoc legislative measures to secure over 90% of the country’s Recovery and Resilience Facility (RRF) allocations through September. These inflows have bolstered an ambitious public investment budget of 8.5% of GDP for 2026, serving as the sole economic counterweight in a year where real GDP is projected to contract by 0.5%.
However, S&P warned that a failure to form a durable government could derail medium-term fiscal targets anchored under the European Union’s excessive deficit procedure. Legislative paralysis has already cost the nation €750 million in forfeited RRF grants due to the inability to pass a unified public wage law, underscoring the risks of prolonged political fragmentation ahead of the 2028 elections.
Romania’s fiscal deficit is projected to narrow to 6.25% of GDP in 2026, down from 7.9% in 2025, driven by tax hikes and expenditure freezes. Despite these improvements, net general government debt is expected to reach 60% of GDP by 2027, driven by rising borrowing costs and a government 10-year bond yield hovering around 7.4%.
External balance sheets also remain under pressure, with the current account deficit forecasted at 7.5% of GDP in 2026. Higher interest payments on external debt and lower foreign direct investment continue to deteriorate the quality of external financing, leaving the country susceptible to sudden shifts in investor sentiment.
Looking ahead, S&P expects economic growth to rebound to 2.25% in 2027, partly supported by the scheduled launch of the €4 billion Neptun Deep offshore gas project, which could turn Romania into a major European gas producer. Nevertheless, S&P highlighted that monetary policy easing will remain constrained in the near term, as double-digit core inflation keeps average HICP at 8.3% for the year.
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