Fiscal plan to play key role in Romania’s fragile sovereign rating
<p>It remains to be seen if policy effectiveness will improve in Romania, given a fragmented legislature and increased social polarisation highlighted by the presidential elections, Fitch Rating agency writes in a post-elections update that doesn’t seem to capture the latest developments on the government formation.</p>

<p>The fiscal plan currently under negotiations among parties to form the new coalition is seen by the rating agency as a primary indicator for the next policies and, therefore, plays a key role in the sovereign update expected for this autumn.</p>

<p>The fiscal consolidation measures that emerge from a coalition agreement will provide a first opportunity to assess in detail how and how fast the next government plans to reduce the deficit in 2025 and 2026.</p>

<p>“Prospects for reducing record-high deficits and stabilising rapidly rising public debt remain central to our assessment of Romania’s sovereign rating following last month’s presidential elections,” Fitch Ratings’s update reads.</p>

<p>Romania’s public indebtedness, historically below average, has recently converged to the BBB median, according to the rating agency.</p>

<p>Romania’s public debt is rated at BBB-/negative, and the first negative action would push it into the non-investment grade with an impact on the availability of foreign financing.</p>

<p>Fitch’s next scheduled sovereign rating review is due on August 15. The assessment of the likely impact of the next government’s consolidation plans will be incorporated into the updated fiscal forecasts, alongside any changes to our GDP and other macroeconomic projections.</p>

<p><em>iulian@romania-insider.com</em></p>

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