Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Romania (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BBB-/Stable; short-term local- and foreign-currency issuer ratings: S-2/Stable) on 2 August 2024.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, click here. 

Romania’s BBB- ratings are underpinned by the following credit strengths: i) strong medium-term growth potential which Scope estimates at around 3.5-4% annually; ii) EU membership and significant structural and recovery fund inflows in coming years; and iii) a still moderate general government debt stock, amounting to 48.8% of GDP at the end of 2023.

Romania’s credit ratings remain constrained by: i) high fiscal deficits of an average 5.6% of GDP over 2024-29, a rigid budget structure, a growing debt-servicing burden and comparatively weak tax base, which limit the pace of fiscal consolidation and result in a rising debt trajectory; and ii) elevated current-account deficits, resulting from fiscal imbalances and weaker competitiveness relative to regional trading partners.

Real output in Romania is expected to grow by 2.4% this year, up from 2.1% in 2023, reflecting robust household consumption amid receding inflationary pressures, expansionary fiscal policy and the roll-out of EU-funded public investment. Expected, gradual loosening in funding conditions and an improving external environment should drive a further acceleration in real growth in 2025 to 2.8%.

Scope projects the general government deficit at 6.8% of GDP in 2024, after 6.6% of GDP in 2023. Scope expects only slow improvements in subsequent years and forecasts a fiscal deficit of a still-elevated 4.7% of GDP by 2029. Near-to-medium term fiscal pressures relate to the revaluation of public sector wages and social transfers, alongside discretionary spending on education, health and defence policy. Longer-term, expanding the tax base and improving revenue collection remain challenges, despite recent encouraging reforms. The debt-to-GDP ratio is set to increase to 51.5% at YE 2024, from 48.8% at YE 2023, before trending up to around 60% by YE 2029, as persistent primary deficits and gradually increasing debt servicing costs are only partly offset by a robust nominal growth outlook.

The Stable Outlook represents Scope Ratings’ view that risks to the ratings remain balanced.

The ratings/Outlook could be upgraded if, individually or collectively: i) fiscal consolidation were strengthened, anchoring Romania’s debt-to-GDP trajectory; ii) external sector risks were curtailed, for example, via a sustained reduction in current account deficits and/or tangible steps taken towards the adoption of the euro; and/or iii) the government’s capacity for reform were strengthened, including improvements in EU fund absorption.

Conversely, the ratings/Outlook could be downgraded if, individually or collectively: i) weaker fiscal metrics resulted in a further deterioration of the country’s public finance dynamics; ii) external vulnerabilities increased, including via elevated current account deficits, intensified financing pressures and/or shrinking international reserves; and/or iii) the ability to effectively absorb EU investment funds weakened, undermining macro-economic and public finance outlooks.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 29 January 2024) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Julian Zimmermann, Associate Director

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