Romania is in a race against time to avoid a downgrade to "junk" status (not recommended for investment - ??Ed. note), as a prolonged political crisis jeopardizes fiscal credibility, Malgorzata Krzywicka, an analyst at the rating agency Fitch Ratings, told Bloomberg.
At the end of July, Fitch affirmed Romania's sovereign rating at "BBB minus" with a negative outlookthe lowest rating in the "investment-grade" category. Fitch is scheduled to release a new assessment of Romania's sovereign rating in January 2027.
The Bucharest government's ability to further reduce the budget deficit and present a credible budget for the coming year will be crucial for the assessment of the country's creditworthiness in the short term, Malgorzata Krzywicka emphasized.
"The longer the crisis persists without a functional government, the more questions arise regarding fiscal predictability and the capacity to implement the necessary adjustments," emphasized Malgorzata Krzywicka.
On Thursday, President Nicusor Dan designated MEP Siegfried Muresan for the position of Prime Minister, following consultations at Cotroceni Palace with the leaders and representatives of the parties and political groups in Parliament. The government led by Ilie Bolojan was dismissed by Parliament on May 5 via a no-confidence motion. Consequently, Romania has had an interim government for over four months.
According to Bloomberg, another failed attempt to approve a government would bring Romania closer to early elections, prolonging uncertainty and increasing risks for the budget and the country's credit rating.
Malgorzata Krzywicka pointed out that the threshold for maintaining the rating rises with each week of the political crisis. "What was supposed to be a relatively short-lived government reshuffle at the time the government fell in the spring has dragged on past the summer. And now we are already past the middle of September, and there is still no solution," the Fitch analyst added.
It stated that Romania needs an additional deficit correction of approximately 1.5 percentage points of GDP to help stabilize the growth of public debt in the medium term. Fitch currently projects Romania's budget deficit for 2026 at 5.9% of GDP, below the 6.2% target set by the government.
According to Fitch analysts, improving tax collection is one of the key ways to reduce the deficit in the coming years, given that "room for maneuver on the expenditure side is limited" following the austerity measures already implemented.
Krzywicka rejected arguments that stimulating economic growth could replace fiscal consolidation. "These are marginal gains. They fall far short of the scale of adjustment Romania needs to undertake. More robust economic growth, in itself, will not solve the problem of large deficits," added Malgorzata Krzywicka, an analyst at the rating agency Fitch Ratings.
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