Romania must implement an additional fiscal adjustment of 0.8–1.0 percentage points (pp) of GDP to meet its 2025 deficit target of 7% of GDP, according to a research report by Erste Group. This is in addition to the 1.85 pp already planned under the initial fiscal corrective package.

Any delays would increase the scale of adjustment required, the financial group warned. Despite the challenges of fiscal consolidation in an adverse political climate, Erste believes that Romania is unlikely to suffer a credit rating downgrade before autumn 2025, provided the government introduces a credible fiscal adjustment plan following the rerun of the presidential elections scheduled for May 4-18.

Both Fitch and S&P recently revised Romania’s rating outlook to negative.

“We believe that the risk of a rating downgrade to ‘junk’ is there, but only if Romania shows no credible fiscal consolidation plans, which currently is not the case,” Erste’s report stated.

To avoid a market meltdown scenario, the government has frozen public sector pension and wage indexations that were scheduled for January 2025, generating spending savings of approximately 1.5% of GDP. It has also closed several fiscal loopholes and exceptions, adding an estimated 0.35% of GDP to state revenues, Erste estimates.

For deficit financing, Erste projects Romania’s gross funding needs for 2025 at RON 235bn (€57bn), assuming a budget deficit of 7.0% of GDP. This translates into a net issuance of RON136bn, of which RON59bn is expected to be financed domestically.

External financing will likely cover the equivalent of €15.5bn, including €11.3bn from the Recovery and Resilience Facility (RRF) loan component available until August 2026, loans from international financial institutions (IFIs), and borrowing from international markets. A total of €2bn in redemptions is due from international markets in 2025.

Romanian authorities have indicated plans to issue €13bn externally in 2025, down from €17.6bn in 2024.