Fitch Ratings has issued a warning concerning Romania’s credit standing, indicating that the country risks being downgraded to junk status if the political crisis persists without a functional government. Malgorzata Krzywicka, an analyst at Fitch, highlighted that prolonged political instability raises significant concerns about fiscal predictability and the government’s ability to implement necessary adjustments.
Romania is in a race against time to retain its credit rating, which was narrowly preserved at investment grade, specifically at BBB-, with a negative outlook, just two months ago. This decision came after the government contested Fitch’s initial evaluation, yet efforts to establish a stable parliamentary majority have repeatedly failed, raising the likelihood of early elections.
Next Fitch Review Scheduled for January 2027
The next reassessment of Romania’s credit rating is set for January 2027. The situation has deteriorated with each week of political uncertainty, as Krzywicka noted that the threshold for maintaining the rating is escalating. “What was expected to be a relatively short government reshuffle after the spring government collapse has extended beyond summer,” she remarked.
Increasing Political Crisis Complicates Fiscal Outlook
Recent developments include the appointment of Siegfried Mureșan, a liberal Member of the European Parliament, as Prime Minister by President Nicușor Dan. Another failed attempt to establish a government only heightens the risk of elections being called, which would prolong uncertainty and increase risks to both the budget and sovereign credit rating.
Other rating agencies, including S&P Global and Moody’s Investors Service, have also noted the ongoing crisis. S&P is scheduled to review Romania’s credit status early next month, with a key decision expected on October 2 regarding whether to maintain or downgrade the country’s rating.
In a discussion with Bloomberg, Krzywicka emphasized that Romania requires an additional fiscal correction of approximately 1.5 percentage points of GDP to stabilize public debt growth in the medium term. Fitch currently estimates Romania’s budget deficit for 2026 at 5.9% of GDP, below the government’s target of 6.2%. Despite reducing the deficit from 9.3% of GDP in 2024, establishing a credible budget trajectory towards a 3% deficit is crucial to avoid a downgrade.
Improving tax collection is one of the key strategies for reducing the deficit in the coming years, Krzywicka noted, as there is limited room for spending adjustments after previously implemented austerity measures.
