Romania: Election of Centrist Candidate Supports Structural Reform Momentum Though Fiscal Pressures Remain

The election of pro-EU, centrist candidate Dan to the Romanian presidency should support policy continuity and ease recent governance concerns. His decisive victory – nearly 54% of the vote amid record voter turnout – and the clear concession by radical right candidate George Simion have helped dispel fears of a contested election, which could have triggered renewed political instability. The result provides a measure of relief after an extended period of political uncertainty, which began last November with the cancellation of the initial presidential run-off due to concerns over foreign interference.

Constructive Relationship with EU

Dan’s election is also likely to foster a continued constructive relationship with EU institutions – a critical factor for economic resilience. Continued EU fund inflows remain vital to financing Romania’s persistent structural current account deficit, estimated at 8.4% of GDP in 2024 (Figure 1). Access to EU balance-of-payments assistance facilities offers an important safeguard against market stress.

Figure 1: Persistent, wide twin deficits are a key credit challenge for Romania
% of GDP

The second round of the presidential election occurred against the backdrop of growing concerns over the fiscal position. The fiscal deficit widened to 8.6% of GDP in 2024, the highest in the EU (Figure 1). Credible and ambitious fiscal consolidation is essential to reversing this deterioration and meeting the targets set out in the medium-term fiscal plan and the National Recovery and Resilience Plan agreed with the European Commission. Failure to deliver on these commitments could jeopardise access to EU funding and weaken the country’s growth and fiscal outlooks.

Election Outcome to Influence Medium-term Economic and Fiscal Outlooks

While the Romanian presidency has limited formal authority over economic policy making, the election outcome will nonetheless influence medium-term macroeconomic and fiscal trajectories. The defeat of the governing coalition’s candidate, Ion Antonescu, in the first round triggered the collapse of the government earlier this month. Coalition negotiations are now expected to begin among the main pro-EU parties, along with representatives of Hungarian ethnic minority groups.

The focus now shifts to two main issues. First, the speed of coalition formation, as prolonged negotiations could delay critical fiscal and structural reforms and, second, the credibility of the new government’s plan for fiscal consolidation, which may be challenged by a fragmented parliament and the difficulty of building consensus.

Romania’s medium-term fiscal plan, endorsed by the European Commission last autumn, targets a reduction in the fiscal deficit to 7% of GDP in 2025. However, Scope has flagged rising risks for achieving this target, driven by weaker-than-expected economic growth and low EU fund absorption. Despite consolidation measures introduced this year, continued fiscal slippage is a key risk, with the budget deficit reaching 2.3% of GDP in Q1 2025, about 0.3 percentage points higher than during the same period last year.

While the presidential election outcome offers near-term relief, the fundamental challenge of forming a stable parliamentary majority willing and able to implement a credible multi-year fiscal consolidation plan remains to be addressed.

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Brian Marly is a Senior Analyst in Sovereign and Public Sector ratings at Scope Ratings GmbH, and lead analyst for Romania’s sovereign rating.