Fitch warns: Romania risks downgrade to 'junk' status if political crisis continues

Romania risks being downgraded to "junk" status (not recommended for investment) if the current political instability persists, warns Malgorzata Krzywicka, an analyst at credit rating agency Fitch Ratings, in a statement to Bloomberg. She explained that the prolonged absence of a functioning government raises serious questions about the country's fiscal predictability and its ability to carry out the necessary adjustments.

What lies ahead for Romania's rating

At the end of July, Fitch decided to maintain Romania's sovereign rating at "BBB minus" with a negative outlook – the last rung of the "investment grade" category. The agency will publish a new assessment of the country's sovereign rating in January 2027. According to the Fitch analyst, Romania's near-term creditworthiness will depend largely on the Government's ability to reduce the budget deficit and put together a credible budget for next year.

The political crisis in context

President Nicușor Dan nominated MEP Siegfried Mureșan for the position of Prime Minister on Thursday, following consultations at Cotroceni with representatives of the parliamentary parties. The government led by Ilie Bolojan was ousted by a vote of no confidence on 5 May, leaving Romania with a caretaker administration for over four months.

According to Bloomberg, should this latest attempt to form a government also fail, Romania would be heading towards snap elections, which would prolong the uncertainty and heighten risks for both the budget and the country's credit rating.

Krzywicka stressed that the bar for maintaining the current rating rises with every week the political crisis goes unresolved: "What was supposed to be a relatively short-lived government reshuffle, at the time the government fell in the spring, has dragged on beyond the summer. And now we are already past mid-September and still have no resolution," the Fitch analyst stated.

What adjustments Fitch is calling for

According to the analyst, Romania would need an additional fiscal deficit correction of approximately 1.5 percentage points of GDP in order to help stabilise the growth of public debt over the medium term. Fitch currently estimates Romania's budget deficit for 2026 at 5.9% of GDP, below the 6.2% target set by the Government.

Fitch analysts believe that improving tax collection is one of the primary means of reducing the deficit in the coming years, given that, following the austerity measures already implemented, "room for manoeuvre on the spending side is limited".

Krzywicka dismissed the notion that stronger economic growth could substitute for fiscal consolidation measures: "These are marginal gains. They are far from the scale of adjustment that Romania needs to make. Stronger economic growth, in and of itself, will not resolve the problem of large deficits," the Fitch Ratings analyst added.