ING: Romania can reach 7.0%-of-GDP public deficit “but not with no policy change”

Romania can achieve a deficit in the vicinity of 7.0% in 2021 but not under a no policy change, ING Bank’s latest comment the budget execution reads.

The Government will need to come up with some (long-expected) fiscal measures to trigger a consolidation cycle, the bank’s analysts argue.

“If properly balanced and targeted, we believe these measures don’t need to be spectacular in size and impact. A ‘little bit of everything’ should do the math,” the report reads. For 2021, ING maintains a long-standing forecast for the budget deficit at 7.3% of GDP.

In nominal terms, after adding the 2021 redemptions, the financing needs will not relax significantly: they should be only marginally lower in 2021 compared to 2020.

Given the above expectations and the issuance pace witnessed recently, ING says that “the Finance Ministry is in a relatively comfortable position and will afford to act opportunistically now and then.”

Compared to 2020, when Romania issued almost EUR 12 billion in Eurobonds (plus EUR 2.3 bln on the local market), the funding split is likely to be less tilted towards the hard currency.

However, ING says that it still expects a decent issuance (around EUR 7 bln of Eurobonds). Retail bonds issuance in RON could increase as well, but it is unlikely to reach a much larger size than the estimation of RON 4 bln issued in 2020.

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