Fitch warns: Romania risks downgrade to 'junk' rating due to political crisis

Romania faces the risk of a downgrade to "junk" status (not recommended for investment), amid a prolonged political crisis that is calling the country's fiscal credibility into question. The warning comes from Malgorzata Krzywicka, an analyst at Fitch Ratings, who spoke to Bloomberg.

The next assessment, in January 2027

At the end of July, Fitch decided to maintain Romania's sovereign rating at "BBB minus" with a negative outlook – the last rung in the "investment grade" category. The agency will publish a new country rating analysis in January 2027.

According to the analyst, how successfully the Government in Bucharest manages to continue reducing the budget deficit and put forward a credible budget for next year will be a decisive factor in the near-term assessment of the country's creditworthiness.

"The longer the crisis persists without a functioning government, the more questions arise about fiscal predictability and the ability to carry out the necessary adjustments," said Malgorzata Krzywicka.

Political context: caretaker government for over four months

President Nicușor Dan proposed on Thursday that MEP Siegfried Mureșan be appointed Prime Minister, following consultations with parliamentary parties at Cotroceni. Previously, the Government led by Ilie Bolojan had been dismissed through a vote of no confidence on 5 May, and since then Romania has been operating with a caretaker Executive for over four months.

According to Bloomberg, a potential failure to approve a new government would bring Romania closer to the scenario of snap elections, prolonging uncertainty and increasing risks for both the budget and the country's credit rating.

The Fitch analyst emphasised that the threshold required to maintain the current rating rises with each week the political crisis continues: "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 the middle of September and still have no resolution."

What Fitch requires to stabilise the deficit

According to Malgorzata Krzywicka, Romania still needs an additional budget 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 estimates Romania's budget deficit for 2026 at 5.9% of GDP, a figure below the 6.2% target set by the Government.

Fitch analysts believe that improving tax collection remains one of the primary solutions for reducing the deficit in the period ahead, as "the room for manoeuvre is limited on the expenditure side," following the austerity measures already implemented.

Malgorzata Krzywicka dismissed the idea that stronger economic growth could substitute for the need for fiscal consolidation: "These are marginal gains. They fall far short of the scale of adjustment that Romania needs to achieve. Stronger economic growth, in and of itself, will not solve the problem of large deficits."