S&P did not relegate the rating of Romania, but maintains the negative perspective, “despite the announced consolidation measures.” Pessimistic and optimistic scenario

The S&P rating agency announced that it has reconfirmed the rating of Romania, which is on a step above the so-called “Junk” level from which the investments are no longer recommended.

S&P thus maintains for Romania the qualification “BBB-/A-3” in the long and short term, both in foreign and local currency. The rating agency has put a negative perspective on the rating of Romania in January this year.

S&P experts say that “the negative perspective reflects our opinion that the risks of Romania's public finances will remain high in the coming years, despite the announced consolidation measures.”

The main ideas in the S&P statement:

• The recent choice of President Nicușor Dan and the formation of a new government led by Prime Minister Ilie Bolojan put an end to a long period of political uncertainty.
• The new government has announced extensive tax consolidation measures based on taxes and expenses, which, according to our estimates, should contribute to reducing the deficit to about 7.7% of GDP in 2025 and 6.4% of GDP in 2026, from 9.3% in 2024.
• Government fiscal measures are taken in a difficult macroeconomic context, characterized by the slowing of the economy, high and growing inflation and a high deficit of the current account (CA). We also observe political challenges related to the implementation of the Fiscal Consolidation Plan.

The pessimistic scenario

We could reduce ratings in the next two years if the fiscal consolidation trajectory of Romania is significantly departing from our expectations.

This could happen if the government's consolidation measures are insufficient or if the modest economic growth prevents their effectiveness, S&P reports.

We could also reduce ratings if the external debt of the country increases significantly over our current assumptions or if the financing conditions for the large and persistent current account deficit are deteriorated.

This could happen if the fiscal correction of Romania does not reduce the current account deficits or if the payment of EU funds to Romania is significantly delayed, according to the International Rating Agency.

The optimistic scenario

“We could revise the perspective at stable if the external and fiscal deficits of Romania would reduce substantially, supported by a recovery of economic growth,” S&P experts say.