The rating agency Moody’s, which, among others, analyzes the viability of states as debtors, welcomed the fiscal measures adopted by the Romanian government toward budgetary balance, according to a press release from the Ministry of Finance.
Moody’s estimates that, if the package is fully implemented, the budget deficit could be 7.8% of GDP by the end of the year, compared to 8.3%, as previously forecast. Next year, the deficit is expected to drop to 6.1%.
Romania’s budget deficit in ESA terms, the EU standard, was 9.3% last year, the highest in the EU bloc.
Despite the overall optimism, the agency also points out that there is a risk that some of the planned measures may not generate the estimated contribution to deficit reduction, either due to deficiencies in execution or due to unforeseen economic conditions.
Although government debt will continue to rise to 62.6% of GDP by the end of 2026 (from 54.8% in 2024), Moody’s now estimates that the debt will plateau at approximately 66.5% of GDP starting in 2029. This projection is below the maximum level of nearly 71% of GDP forecast in March, when Romania’s outlook was changed to negative.
The rating agency also appreciates the government’s intention to adopt a second package of measures by the end of July, which could include new fiscal measures for generating revenue and reducing expenditures.
“These, along with reforms in the governance of state-owned companies and regulatory agencies, will further contribute to deficit reduction,” the report emphasizes.
Moody’s says that strictly adhering to the established fiscal targets is essential for the success of the consolidation program. A firm commitment to budgetary objectives is considered crucial for maintaining Romania’s fiscal credibility and ensuring a sustainable reduction in the deficit.
The agency warns that any deviation from the assumed plan could undermine stabilization efforts and could exert additional downward pressure on the country’s sovereign rating.
Finally, the rating agency highlights that full and effective implementation of the fiscal measures package will be a significant challenge. It also considers the full implementation of the reforms included in the National Recovery and Resilience Plan (or PNRR) as crucial for further fiscal consolidation and, implicitly, for accessing European funds.
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