The political crisis in Romania could affect the external financing of the country, warns S&P

The political crisis in Romania and the possible delays in the political response to the economic imbalances after the coalition government could undermine some sources of external financing, S&P Global, the mother company of the S&P rating company, quoted by Reuters.

The Central Bank of Romania intervened on Thursday to support the lion, against the background of an increase in loan costs, after the victory of the Radical Right Presidential candidate George Simion in the first round of the poll of the political crisis in the second largest economy in Central Europe, notes the quoted source.

S&P Global said that the main risk for Romania, which registers the highest budget deficit in the EU, of over 9% of GDP, is how it will finance its big twin deficits by 2026, against the background of prolonged political impasse and weakening of economic growth.

“The access of the government to the Euro -Bliging market has been fragile, which led to pressure on the exchange rate and the internal bond market. In addition, the inefficient elaboration of policies could cause EU funds, especially those within the PNRR, to be less available,” says S&P.

The Romanian economy increased by only 0.8% last year, the slowest pace of the Covid-19 Pandemia, growing slowly every year since 2021.

The lion, which came out of the gathered intervals on Tuesday in which it remained largely of the last three years, has reduced its weekly correction on Thursday, but was still trading over the key threshold of 5 units for one euro, notes Reuters.

The yield of 10 -year bonds has increased by approximately 100 basic points from the beginning of this week, reaching the highest level after November 2022.

What are the scenarios after the elections, according to S&P

Surveys show that Simion, the candidate of the harsh right, is favorite for the second round of May 18, but, regardless of the result of the election, the elaboration of policies in Romania would become more fragmented, less stable and less effective in the next few months, explained S&P Global.

“(This) could lead to weaker economic, fiscal and external results than our already pessimistic hypotheses,” the company added.

S&P Global said that among his post-electoral scenarios is that of an unstable minority government, which could try to go further with fiscal consolidation measures.

A decision to convene early parliamentary elections would further delay budgetary reductions and put pressure on refinancing efforts, while a third scenario provides for the formation of a Union Government with sufficient support for fiscal stabilization.

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