Harsh warning from S&P Global amid political chaos. The agency says that Romania is one step away from “junk”

The dismissal of the Bolojan Government through a motion of censure scares investors while Romania suffers from a “double deficit”, warned one of the most important financial evaluation agencies, which maintained the rating for our country, but the outlook remains negative.

S&P Global has warned Romania that it may lower its rating in the future if the government impasse continues. It is the first of the three big rating agencies to officially announce such a message after the fall of the Executive.

The warning was officially sent by the rating agency, through an unscheduled report. At this moment, the current rating was confirmed, at “BBB-/A-3” in the long and short term, the last step before junk, and the outlook remains negative.

Romania already spends more than it collects in taxes and continues to import more than it exports and the government crisis and the survival of the economy depends on the European money from the PNRR.

“The dissolution of the four-party coalition will complicate efforts to reduce Romania's high twin deficits – the current account deficit and the fiscal deficit – as the 2028 elections approach. However, there is broad consensus across parties for further fiscal adjustments and reforms in 2027, and a new government is likely to be formed in the coming weeks. Stronger fiscal performance so far this year, driven by tough consolidation measures adopted in 2025 and the considerable future payments of EU funds, should anchor Romania's external financing conditions, given that the current account deficit is gradually narrowing from an estimated percentage of 7.9% of GDP last year. We have confirmed our long-term and short-term credit ratings on Romania. The outlook remains negative, according to the American company, quoted by News.ro.

According to the rating agency, the vulnerabilities of the Romanian economy continue to fuel the risks.

“The negative outlook reflects our view that the implementation risks related to the consolidation of Romania's public finances and the narrowing of its external deficits will remain high over the next 6 to 12 months. The outlook also reflects Romania's susceptibility to changing investor confidence, due to considerable external financing needs and high non-resident holdings of government debt,” the S&P Global agency said.

Standard & Poor's warns that Romania's rating could be reduced if political instability continues.

“We could reduce our ratings on Romania if its government impasse were to prolong or lead to an inability to further reduce fiscal deficits in 2027. We believe that if the Government of Romania is unable to obtain the expected inflows of EU funds in the period 2026-2027, this would limit the growth prospects of the economy, strengthen the fiscal complication of the Government and amplify the balance of payments risks,” he said. rating agency.

A decrease in rating would translate into more expensive loans for the Romanian state, which will affect those who have loans by increasing interest rates. In addition, the leu could also depreciate against the European currency, which would lead to further increases in prices and fuel inflation that is already approaching the 11% mark.

S&P also says it could also consider a downgrade if external pressures intensify, for example through a more severe or lasting disruption of the energy market caused by the war in the Middle East, which would affect Romania's medium-term inflation expectations and, at the same time, significantly weaken economic growth, the country's balance of payments position and fiscal results.

The outlook could be revised to stable if Romania's external and fiscal deficits were to shrink substantially, supported by a return to economic growth.

The agency's expectations are that a broad fiscal consensus among key parties will support major consolidation measures this year and next, including the approval of a credible 2027 budget, despite the dissolution of the governing coalition 11 months after it was formed.

“We also expect Romania to obtain most of the EU's available financing facilities this year (up to 3.5% of its GDP), which could cover a significant part of Romania's high external financing requirements,” notes the agency, assessing as risks the economic and political challenges that could undermine Romania's medium-term fiscal adjustment plan.

S&P noted that the current domestic political crisis comes at a time when Romania must balance additional fiscal adjustments with limiting the effects of the global energy price shock.

“In particular, the government must continue to implement a consolidation agenda to stay on track to meet its EU excessive deficit procedure requirements; implement a series of reforms to secure EU fund flows, including from the Recovery and Resilience Mechanism (RRF), the Security Action for Europe (SAFE) and the Cohesion Fund; and address the effects of stagflation driven by the conflict in The Middle East”, indicated the rating agency.

President Nicușor Dan recently declared that Romania will have a “pro-Western” government in a “reasonable time”. The head of state is holding official consultations with parliamentary parties on Monday, but made it clear on Friday that he will not announce a prime minister soon.