Moody’s: good news, but…
Moody's confirms Romania's “Baa3” rating, although the outlook remains negative.
Mihai Pelin, 15.09.2025, 13:50
The US financial rating agency Moody’s has decided to keep Romania in the investment grade category (BAA3 rating), with a negative outlook.
The decision comes after the Romanian government took steps to reduce the budget deficit, such as increasing VAT and scrapping subsidies on energy bills, which have significantly improved Romania’s fiscal prospects.
Moody’s warns however that significant risks remain, related to continued political support for these measures, as well as to ensuring spending discipline and an increase in public budget revenues.
The rating assigned by international agencies influences the interest rates at which the government borrows money on foreign markets, which in turn are reflected in the loans granted to companies and individuals.
The finance ministry emphasizes that, according to Moody’s, the rating reconfirmation relies on the economy’s solid growth potential and the high income levels compared to countries in the same rating category. At the same time, Romania’s credit profile is constrained by high vulnerability to event-type risk, determined by its high exposure to geopolitical risk due to the proximity of the war in Ukraine.
In turn, the decision to keep the negative outlook reflects the significant risks related to the implementation of the Romanian government’s ambitious fiscal consolidation program. According to Moody’s, the combined measures exceed 3% of GDP in 2025 and 2026, with the main contributions brought by the VAT increase and the continued freeze on public sector salaries and pensions. These measures have led to a revision of the estimated deficit for 2026 to 6.1% of GDP, from a 7.7% estimate in March.
The rating agency expects the deficit adjustment trend to continue in 2027 and beyond, leading to a stabilization of the public debt to GDP ratio at around 65%.
Moody’s rating reconfirmation once again emphasizes that Romania is on a credible path of fiscal consolidation, despite a complex domestic and international context. This trend is not without challenges, and preserving the confidence of investors and international partners depends on the consistency with which we will carry on the fiscal consolidation plan, the finance minister Alexandru Nazare said.
In the agency’s opinion, the main factor that could drive the country rating down is the failure to implement the government’s fiscal consolidation plan in an effective manner, which would lead to a significantly worse evolution of Romania’s key fiscal indicators than Moody’s current estimates. A significant increase in geopolitical risk stemming from the war in Ukraine or increased pressure on the funding of Romania’s large current account deficit would also contribute to a negative rating, according to the agency. (AMP)
