Romanian economy risks “hard” landing if political instability persists, finance minister says
Romanian finance minister Tanczos Barna, present on Wednesday, May 7, at the Romanian Business Leaders Summit in Bucharest, said that a hard landing (signaling a sharp correction) of the Romanian economy is possible, as a “soft” landing is not very credible, considering the 8.3% budget deficit.
The minister’s comments come after the Romanian stock market saw a flash sale after the first round of the presidential elections which brought far-right populist George Simion to first place, with 40% of the votes.
“A fiscal reform is needed. If you had asked me a week ago, I would have said that I still saw a possibility for 2025 to end without substantial changes on the revenue side, meaning taxes and levies. Things should be analyzed after the elections by those who will not be interim. But from a fiscal standpoint, things are not as bad as the media sometimes portrays them,” said the minister, cited by Economedia.
However, Tanczos Barna stated that a soft correction is not credible, and Romania can no longer avoid a hard landing. The “landing” will depend on the “pilot,” on who is “flying the plane,” he specified. “If we have stability and we get a government in charge as soon as possible and it starts implementing measures, the landing is manageable. Of course, such a landing always depends on the level you’re landing from. We’re landing from an 8.6% deficit, quite high,” he added.
According to the Finance Minister, capital movements are significant at the moment but can be kept under control. “I’m relying on the closing balance of 2024 from the National Bank, with a very solid situation, a historic reserve, unprecedented preparation in the region, and the stability maintained so far, which can continue to be guaranteed by the BNR,” he said.
Tanczos Barna also said that there is enough money in the BNR reserve to support the exchange rate and a buffer to support short- and medium-term expenses. The RON dropped simultaneously with the Bucharest Stock Exchange, as investors exchanged it for more foreign currency.
Barna mentioned that a balance can only be created if operations are carried out on both the expenditure and revenue sides, but it’s preferable not to make cuts to investments. As a result, cuts will most likely be seen with operational expenses. The minister also cited record revenues in April and the limits placed on spending as reasons for optimism, along with record investments.
(Photo source: Inquam Photos | George Calin)
