Romania’s Credit Rating Holds Steady at ‘BBB-‘ Amidst Economic Headwinds
Fitch Ratings has affirmed Romania’s Long-Term Foreign-Currency Issuer Default Rating at ‘BBB-’ with a Negative Outlook, as of February 13, 2026. This decision reflects a complex interplay of factors, including the country’s EU membership and governance indicators, balanced against persistent budgetary and current account deficits.
Key Factors Supporting the Rating
The ‘BBB-’ rating is underpinned by Romania’s membership in the European Union and the associated capital inflows. These inflows have contributed to income convergence and improved access to external financing. Romania’s GDP per capita and governance indicators also exceed those of other countries within the same rating category.
Challenges and Concerns Driving the Negative Outlook
Despite these strengths, Fitch highlighted several concerns contributing to the Negative Outlook. These include large and persistent budgetary and current account deficits, a rising public debt level, political polarization, and a relatively high net external debt.
Government Efforts at Fiscal Consolidation
The current Romanian government, formed in the summer of 2025, has initiated significant fiscal consolidation measures. These steps are expected to lead to substantial fiscal consolidation in 2026, although the 2026 budget had not yet been adopted as of February 14, 2026. The implementation of measures like the increase in VAT in August 2025 has already shown a downward trend in the budgetary deficit.
Debt and Deficit Levels Remain a Concern
Romania’s public debt has increased rapidly in recent years, reaching almost 59% of GDP at the end of 2025. Without additional measures, this ratio is projected to rise to 63% in 2027. The budgetary ESA deficit was estimated at nearly 8% of GDP in 2025, despite preliminary cash deficit figures showing 7.7%.
Economic Growth and Inflationary Pressures
Economic growth remained below 1% in 2025, constrained by fiscal consolidation and weak external demand. Growth is forecast to remain below its potential of 2% until 2027. High inflation, exceeding the National Bank of Romania’s target range for five years, also remains a weakness, exacerbated by the temporary inflationary impact of the VAT increase and the expiration of energy price caps.
Political Stability and EU Funding
Political uncertainty has diminished following the election of President Nicuşor Dan and the formation of a four-party pro-Western government in July 2025. However, tensions within the governing coalition, particularly during budget negotiations, could hinder further fiscal reduction measures. Substantial EU funds continue to support Romania’s access to external financing and support cover its twin deficits.
Financing Needs and External Vulnerabilities
Significant anticipated EU inflows in 2026 are expected to reduce Romania’s external financing needs. However, the country remains vulnerable to shifts in global market sentiment. Borrowing costs have decreased since August 2025, reflecting both domestic developments and resilient investor appetite for emerging market assets.
Looking Ahead: Potential for Rating Improvement
Fitch indicated that a positive shift in the outlook could occur if consistent progress in fiscal consolidation stabilizes public debt in the medium term and if a structural reduction in the current account deficit is achieved.
Did you know?
Romania’s ESG (Environmental, Social, and Governance) relevance score is ‘5[+]’ for political stability and rights, reflecting a moderate level of institutional capacity and rule of law.
FAQ
Q: What is a ‘BBB-‘ credit rating?
A: It is a speculative grade rating, indicating moderate credit risk.
Q: What does a ‘Negative Outlook’ mean?
A: It suggests that Fitch may downgrade the rating in the future if conditions worsen.
Q: What factors could lead to a rating upgrade?
A: Consistent fiscal consolidation and a reduction in the current account deficit.
Q: What is ESA deficit?
A: It refers to the deficit calculated according to the European System of Accounts methodology.
Pro Tip: Keep an eye on Romania’s fiscal performance and EU fund absorption rates, as these will be key determinants of its credit rating trajectory.
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