Romania is in a race against time to avoid being downgraded to ‘junk’ (not recommended for investment – ed.), as a prolonged political crisis threatens fiscal credibility, Malgorzata Krzywicka, an analyst at financial rating agency Fitch Ratings, told Bloomberg.

At the end of July, Fitch affirmed Romania’s sovereign rating at ‘BBB minus’, with a negative outlook, making it the last rating in the ‘investment grade’ category. Fitch is due to publish a new assessment of Romania’s sovereign rating in January 2027.

The Bucharest government’s ability to reduce the budget deficit further and present a credible budget for the following year will be crucial to assessing the country’s creditworthiness in the short term, Malgorzata Krzywicka stressed.

‘The longer the crisis persists without a functioning government, the more questions arise about fiscal predictability and the ability to make the necessary adjustments,’ Malgorzata Krzywicka stressed.

President Nicușor Dan on Thursday designated MEP Siegfried Mureșan for the post of prime minister, following consultations at Cotroceni Palace with the presidents and representatives of the parties and political formations in Parliament. The government led by Ilie Bolojan was dismissed by Parliament on 5 May through a no-confidence motion. As a result, Romania has had a caretaker government for more than four months.

According to Bloomberg, another failed attempt to approve a government would bring Romania closer to snap elections, prolonging uncertainty and increasing risks to the budget and the country’s rating.

Malgorzata Krzywicka indicated that the threshold for maintaining the rating rises with each week of political crisis. ‘What was supposed to be a relatively short-lived government reshuffle when the government fell in the spring has continued beyond the summer. And now we are already past the middle of September and still have no solution,’ the Fitch analyst also said.

She said Romania needed a further deficit correction of approximately 1.5 percentage points of GDP to help stabilise the growth of public debt over the medium term. Fitch currently estimates Romania’s budget deficit for 2026 at 5.9% of GDP, below the 6.2% target set by the government.

In the view of Fitch analysts, improving tax collection is one of the key ways of reducing the deficit in the coming years, as ‘there is limited room for manoeuvre on the expenditure side’ following the austerity measures already implemented.

Krzywicka rejected arguments that stimulating economic growth could replace fiscal consolidation. ‘These are marginal gains. They are far short of the scale of the adjustment Romania needs to make. Stronger economic growth on its own will not solve the problem of large deficits,’ added Malgorzata Krzywicka, an analyst at financial rating agency Fitch Ratings.

Source: AGERPRES