Fitch Revises Romania's Outlook to Negative; Affirms at 'BBB-'

Fitch Ratings announced that it has revised its outlook on Romania’s long-term credit rating to negative from stable, while affirming the rating at "BBB-".

The rating agency explained that “political uncertainty has risen to high levels, and our assessment is that it is likely to have a significant negative impact on fiscal consolidation.”

The Constitutional Court annulled the presidential election process after the surprise victory of far-right candidate Calin Georgescu in the first round due to alleged foreign/Russian interference in the election. The court also extended the term of current President Klaus Iohannis, which was due to end on December 21, 2024, until a new president is elected.

Fitch Ratings expects Romania’s general government deficit to rise to 8.2% of GDP in 2024, higher than the previous review forecast in August of 7.2%.

Although Fitch assumes that fiscal consolidation will begin in 2025, it has revised its general government deficit forecast to 7.5% of GDP in 2025 and 6.8% in 2026 – more than double the current BBB average of 3.2% over 2025-26. 

“In our view, fiscal consolidation is likely to face difficult trade-offs due to the potential negative impact on already weak economic growth and the risk that financial market volatility could lead to higher interest costs, further weakening the fiscal position,” the rating agency commented.