Financial rating agency Moody's has completed a periodic review of Romania's ratings, including its long-term Issuer and Senior Unsecured Ratings Baa3 with a negative outlook, noting that this outlook reflects the significant implementation risks associated with the Bucharest Government's ambitious fiscal consolidation program.
According to Moody's, the fiscal measures adopted since July 2025 have had a positive impact on Romania's fiscal outlook. However, significant implementation risks persist for reducing the deficit in the long term, particularly due to the challenge of maintaining political support for continued fiscal consolidation after 2026, given the planned rotation of the prime minister in 2027 and the parliamentary election scheduled for 2028.
Romania's ratings would likely be downgraded if we conclude that the Government is unable to implement its fiscal consolidation plan in an efficient manner, which would result in a significantly worse evolution of the main fiscal indicators compared with our current expectations. Such a scenario would also reflect weaknesses in the institutions' capacity to efficiently implement a broad and complex consolidation program, Moody's said.
Conversely, the agency could improve the outlook associated with Romania's rating to "stable", if the government debt burden and debt-affordability indicators evolve broadly in line with its current expectations. However, this would require the full and effective implementation of the fiscal consolidation program adopted in 2025, with the consolidation process continuing in 2027 and beyond, although likely at a more moderate pace than in 2026.
According to Moody's, Romania's ratings reflect the economy's solid medium-term growth potential and its relatively high level of wealth, both of which support its economic strength. However, Romania's public debt is expected to deteriorate in the coming years due to the high fiscal deficit. In addition, challenges in areas such as corruption control and the effectiveness of fiscal policy highlight certain institutional and governance weaknesses in Romania relative to similarly rated countries.
The rating agency notes that Romania's fiscal deficit has begun to decrease following the significant fiscal consolidation measures announced in July and September 2025. Moody's analysts expect Romania's fiscal deficit to drop to 6.3% of GDP by the end of 2026, from an estimated 8.2% at the end of 2025 and a peak of 9.3% at the end of 2024. Although this requires a significant fiscal consolidation effort, the public debt burden is expected to continue rising after 2026 unless additional measures are adopted. Based on the assumption that the overall deficit will fall to 5.7% of GDP by the end of 2027, Moody's analysts estimate that the debt burden will reach 62.9% of GDP at the end of 2027, up from 60.5% at the end of 2025.
The fiscal consolidation effort is contributing to a slowdown in the growth rate of the Romanian economy. According to Moody's, real GDP growth slowed to 0.6% in 2025, as higher VAT and inflation, combined with the freezing of public-sector wage and pension indexation, drove down consumption.
Maximizing Romania's absorption of funding under the EU's Recovery and Resilience Facility (RRF) before the program's August 2026 deadline will be crucial to avoid an economic contraction in 2026, Moody's emphasizes.
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