Running out of patience

Erste Bank Research Team Erste Bank

Political instability weighs on Romania’s credibility to deliver on fiscal consolidation, stabilizing the debt trajectory and thus its rating. The current account balance remains another major weakness for Romania. Moody’s warned in an issuer comment in August that the failure to reach a political agreement on the public wage law ‘has negative consequences for Romania’s sovereign credit profile’ and that the importance of the 2027 budget bill for the credit rating increased. The next rating review is due October 2 from S&P.

Romania appears to be moving out of a recession, although near-term momentum remains weak. We see activity staying soft through 2H26, followed by a gradual recovery towards potential in 2027. After subdued growth in 2025, we forecast a mild contraction in 2026, at around -0.7%, mainly due to weak consumer demand, partly offset by EU-backed investment. Inflation decelerated to 6.2% y/y in August on statistical base effects and is projected to reach 6.4% y/y by year-end. The NBR is expected to leave the policy rate unchanged at 6.50% throughout 2026, while government bond yields should settle around 7.0%.

Overall, the outlook is shaped by fragile domestic demand, persistently high inflation, and elevated political and fiscal uncertainties. Investment decisions will depend heavily on credible policy frameworks that can reduce uncertainty and help restore consumer confidence. Preserving the IG sovereign credit rating depends on restoring policymaking coherence to reduce the risk of fiscal slippage and eventually cap the upward trend in the debt-to-GDP ratio.

The expectations are that a new fully-functional government is soon to be installed.

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Erste Bank Research Team

Erste Bank

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