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 macro-economic 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 rating’s 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 on 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 21 January 2025.

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, please see here.

Romania’s BBB- long-term credit ratings are supported by: i) strong medium-term growth potential which Scope estimates at around 3.5% 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 an estimated 54.9% of GDP at the end of 2024.

Conversely, credit challenges associate with: i) high fiscal deficits, forecast to average above 6.0% of GDP over 2025-29, 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 competitiveness pressures relative to regional trading partners.

Real growth decelerated to an estimated 1.0% last year, down from 2.4% in 2023. Household consumption remained robust, driven by high wage growth and accommodative fiscal policy. At the same time, the negative contribution from net exports worsened, amid strong domestic demand, a tepid economic momentum among key trading partners and declining service export surpluses. Growth is expected to pick-up gradually over coming years, to 2.3% this year and 2.8% in 2026, underpinned by resilient private consumption and an acceleration in EU funds implementation, though the fiscal consolidation process is likely to weigh on the economic recovery.

The fiscal deficit worsened to an estimated 7.9% of GDP in 2024 (from 6.5% in 2023) on accounts of significant inflation-related pressures on public sector wages and pensions alongside lower-than-expected EU funds disbursements. Romanian authorities’ medium-term fiscal-structural plan, which was approved by the European Commission in November 2024, aims for significant, albeit gradual deficit reductions over coming years, seeking to bring the fiscal deficit below the 3% of GDP Maastricht threshold only by 2031. Scope thus expects the debt-to-GDP ratio to rise to 67% by 2029 from 54.9% in 2024, almost double the pre-Covid level of 35.0% in 2019, a key credit challenge. While the adopted consolidation measures in late December 2024, including the suspension of social transfer and wage indexation mechanisms and a freeze of public employment growth, will help curb spending pressures, further efforts will be required to achieve significant improvements in fiscal metrics.

The structure and implementation of the 2025 budget, which the government will publish shortly, will therefore be key to Scope’s assessment of Romania’s fiscal outlook. Scope notes that the credibility of medium-term fiscal targets has deteriorated recently, following repeated episodes of fiscal slippage. Moreover, while Scope expects broad policy continuity from the new government, its narrow parliamentary support and the heightened political uncertainty following the cancellation of the November 2024 presidential election will likely constrain consolidation efforts and the implementation of the structural reform agenda. Preserving a constructive dialogue with the European Commission, including via the execution of policies agreed under the National Recovery and Resilience Plan and the achievement of medium-term fiscal targets, will remain an essential supportive factor to Romania’s creditworthiness.

The Stable Outlook represents the opinion that risks for the ratings are balanced.

The long-term ratings/Outlooks could be upgraded if, individually or collectively: i) fiscal consolidation were strengthened, anchoring Romania’s debt-to-GDP trajectory; ii) the government’s capacity for reform were strengthened, including improvements in EU fund absorption; and/or iii) 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.

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

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