Romania’s public debt hits 50% of GDP after May Eurobond issue

Romania’s public debt reached RON 614.3 bln (EUR 124.3 bln) at the end of May after the Government raised EUR 1.75 bln in the month with its third series of Eurobonds this year.

The debt-to-GDP ratio hit 50%, from 49.1% at the end of April and 48.8% at the end of 2021 - but we expect the ratio to decrease by the end of the year, diluted by the inflation-driven nominal increase in GDP. The country’s public debt thus increased by EUR 7.5 bln in the first five months of the year - half the increase during the whole of last year.

The debt-to-GDP ratio increased however by 1.2pp, compared to the 1.4pp advance seen throughout  2021. This was because nominal GDP in 12 months to March 2022 (the latest rolling 12-month data available) edged up by only 3.9% compared to the 2021 GDP - a moderate advance compared to the expected rise in the nominal GDP for the whole of 2022.

Under the latest projection of the state forecast body CNP, Romania’s GDP will increase by a nominal 16.2% this year. Based on our calculations and assuming a constant exchange rate, Romania’s public debt can increase by another RON 55 bln (EUR 11 bln) by the end of the year and the debt-to-GDP ratio will remain at 48.8% - as it was at the end of 2021. The exchange rate effects are negligible for the local currency’s depreciation in the range of a couple of percentage points as expected by analysts.

iulian@romania-insider.com

(Photo source: Dreamstime.com)

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Romania’s public debt hits 50% of GDP after May Eurobond issue

Romania’s public debt reached RON 614.3 bln (EUR 124.3 bln) at the end of May after the Government raised EUR 1.75 bln in the month with its third series of Eurobonds this year.

The debt-to-GDP ratio hit 50%, from 49.1% at the end of April and 48.8% at the end of 2021 - but we expect the ratio to decrease by the end of the year, diluted by the inflation-driven nominal increase in GDP. The country’s public debt thus increased by EUR 7.5 bln in the first five months of the year - half the increase during the whole of last year.

The debt-to-GDP ratio increased however by 1.2pp, compared to the 1.4pp advance seen throughout  2021. This was because nominal GDP in 12 months to March 2022 (the latest rolling 12-month data available) edged up by only 3.9% compared to the 2021 GDP - a moderate advance compared to the expected rise in the nominal GDP for the whole of 2022.

Under the latest projection of the state forecast body CNP, Romania’s GDP will increase by a nominal 16.2% this year. Based on our calculations and assuming a constant exchange rate, Romania’s public debt can increase by another RON 55 bln (EUR 11 bln) by the end of the year and the debt-to-GDP ratio will remain at 48.8% - as it was at the end of 2021. The exchange rate effects are negligible for the local currency’s depreciation in the range of a couple of percentage points as expected by analysts.

iulian@romania-insider.com

(Photo source: Dreamstime.com)

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