FITCH estimates for the budget deficit. What are the three risk factors mentioned by the agency

The Fitch Ratings Financial Evaluation Agency has revised its estimates regarding the evolution of the government deficit of Romania, which would be reduced this year up to 8.5% of GDP, from the record level of 9.3% of GDP registered last year, and, due to the high starting point, it is expected that in the following years it will decrease up to 7% of the GDP in 2026 and 6.5% and 6.5% It shows a Fitch analysis published on Friday, Agerpres reports.

According to Fitch, the review, upwards of the budget deficit forecast following the rectification shows the challenges Romania faces in stopping the deterioration of public finances and implementing sufficient consolidation measures to reduce large tax deficits and stabilize medium -term debt.

“Additional fiscal measures could also encounter difficulties in the implementation process, against the background of fatigue, modest economic growth and persistent political uncertainty,” Fitch analysts stresses.

Rectification has limited effect on deficit

According to the budget rectification of October 1, this year's deficit will be 8.4% of GDP, compared to 7% as provided in the February budget. The main adjustments are on the expense side (increasing by 27.8 billion lei, ie 1.6% of the Estimated Fitch GDP), especially higher interest payments, as well as expenses for social assistance and health.

Fitch analysts believe that this budget rectification shows that the total fiscal deficit of Romania, in cash, will decrease by only 0.3 percentage points, from 8.7% of GDP in 2024 (the primary deficit will decrease by 1.1 percentage points). This despite the initial freezing of the expenses announced in January 2025 by the former government and the July tax package (whose impact was initially estimated at 1.1% of GDP), introduced by the new coalition.

“This emphasizes the difficulties related to the pressures on social expenses, the higher costs of loans and the slow economic growth, which complicates a reduction of the deficit compatible with stabilizing the medium -term public debt,” Fitch shows.

The evaluation agency emphasizes that the reduction of deficits and the stabilization of the debt are crucial conditions for lifting the “negative” perspective associated with the BBB minus country rating attributed to Romania.

“Given the size of the deficit and the process of consolidation for several years, a key challenge will be to strengthen the credibility of the fiscal policy, especially after various revisions of the tax targets in 2024, after which the budget deficit increased from an initial target of 5% to 8.7% per CASH. Fitch analysts.