Fitch analyst says risks on Romania's rating are "mostly balanced"

The risks to Romania's rating are "largely balanced," Fitch Ratings analyst Greg Kiss told Reuters, adding that the relatively low level of public debt represents a favorable starting point for measures aimed at reducing the largest budget deficit in the EU, Economica.net reported.

The comment comes after a research note from the Austrian financial group Erste said that the delayed closing of the twin deficit puts the country's sovereign rating under pressure.

Romania's budget deficit rose to 3.24% of GDP at the end of April, which, according to analysts and the European Commission, will make the deficit target for 2024 of 5% of GDP, not realistic.

The European Commission expects Romania's budget deficit to rise to 6.9% of GDP in 2024, boosted, among other things, by the cost of pension reform, and to continue to grow in 2025, up to 7% of GDP, which would it meant the largest budget deficit of an EU member country for both years.

"An important risk is that of fiscal slippage," admitted Fitch analyst Greg Kiss.

"According to cash data, in the first four months of the year, the budget deficit is higher than in previous years. So this is still a risk for Romania," he added.

In March, Fitch confirmed Romania's country rating at "BBB minus" with a stable outlook.

"I think we're largely in line with the baseline scenario that we laid out in the March review, but there are still risks," Greg Kiss said, adding that there were no "unpleasant surprises" in the election of June 9, which strengthened the position of the centrist parties in Romania.

Fitch expects more fiscal adjustment measures in 2025 when Romania must deliver to the financial markets and the European Commission a credible medium-term fiscal consolidation plan in order to benefit from European funds worth several billion euros.

(Photo source: Erik Lattwein/Dreamstime.com)