Moody’s sees a credibility boost for Romania but warns of the deficit, inflation and the euro-leu exchange rate

The swearing-in of the new Government increases the chances that Romania will adopt the 2027 budget on time, but the economy remains exposed to significant risks, according to an analysis published by rating agency Moody’s.

The agency believes that the political stability resulting from the vote on the new Executive can help strengthen the country’s credibility. Budget adoption is considered the Government’s first major test, as the authorities must finance the announced measures while continuing to reduce the budget deficit.

Moody’s estimates that Romania’s economy will contract by 0.5% this year. At the same time, the state’s interest costs are rising, putting additional pressure on public finances. The agency nevertheless expects the budget deficit to continue declining.

A separate warning comes from the National Bank of Romania. In a document published on Tuesday, the NBR said that risks to the euro-leu exchange rate remain high. The euro was quoted at nearly 5.33 lei, slightly above the previous day’s level.

The NBR also expects inflation to rise by the end of the year, above its previous estimate. Energy, fuel and the leu’s depreciation are the main factors that could fuel price pressures.