Fitch Ratings Reaffirms Romania’s ‘BBB-‘ Credit Rating with Negative Outlook Amid Fiscal Concerns

Fitch Ratings has reaffirmed Romania’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-‘ with a Negative Outlook, highlighting a complex blend of economic strengths and growing vulnerabilities. The decision, announced on February 21, 2025, reflects the nation’s ability to leverage its EU membership for capital inflows and macroeconomic stability, while also grappling with widening fiscal and external deficits, rising public debt, and a turbulent political climate.

Romania’s EU membership remains a cornerstone of its economic resilience, supporting income convergence and providing a steady stream of external financing. The country’s GDP per capita, governance standards, and human development indicators stand above those of many peers within the ‘BBB’ rating bracket. However, these strengths are being overshadowed by significant economic and political headwinds.

One of the most pressing concerns is Romania’s mounting fiscal deficit, which reached 8.7% of GDP in 2024 — the highest among ‘BBB’ rated sovereigns. This surge in public spending was fueled by rapidly growing expenditures, including public sector salary hikes and unfunded pension increases ahead of elections. These fiscal pressures have exacerbated the country’s current account deficit, further straining its economic outlook.

Adding to the uncertainty is the recent wave of political instability. Since late 2024, Romania has faced intensified political turmoil after the Constitutional Court annulled the presidential election, citing foreign interference. The unexpected first-round victory of populist candidate Calin Georgescu has stirred further controversy, with a new election scheduled for May 2025. The ongoing ambiguity surrounding the candidates’ eligibility has only deepened concerns about the country’s governance and its ability to implement much-needed fiscal reforms.

Economic growth has also slowed considerably. Romania’s GDP growth averaged just 0.9% in 2024, a sharp decline from 2.4% in 2023. While household consumption showed some resilience, buoyed by rising incomes and loose fiscal policies, exports struggled due to sectoral disruptions. Fitch projects a modest recovery, with GDP growth expected to reach 1.4% in 2025 and 2.2% in 2026, but warns that these figures remain vulnerable to internal and external shocks.

The public debt trajectory presents another area of concern. Fitch forecasts Romania’s public debt to climb from an estimated 53% of GDP in 2024 to nearly 60% by 2026, surpassing the ‘BBB’ median of 56%. This trend signals growing pressure on the government to enact credible fiscal consolidation measures to prevent further erosion of investor confidence.

Fitch’s reaffirmation of Romania’s ‘BBB-‘ rating underscores a delicate balance between economic potential and mounting fiscal and political risks. While EU membership provides a crucial buffer, the persistence of large deficits, sluggish growth, and political uncertainty weigh heavily on the country’s economic future. The Negative Outlook reflects Fitch’s view that unless Romania takes concrete steps to stabilize its public finances and address its twin deficits, further rating downgrades could be on the horizon.

For Romania to reverse this trajectory, Fitch highlights the need for sustained fiscal discipline, including credible consolidation efforts to rein in public debt and narrow the current account gap. Conversely, any further slippage in fiscal policies or escalation of political instability could prompt a reassessment and potential downgrade.

This latest rating decision is a stark reminder of the urgent reforms required to bolster Romania’s economic standing and restore investor confidence in an increasingly uncertain environment.