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2024/06/12 / Erste Group Research

Fiscal slippage concerns on the rise

The correction in the twin deficits is likely to be delayed into 2025, remaining a key concern for markets and the rating outlook. The media reported the budget deficit at 3.4% of GDP after five months, from the 3.2% officially announced at the end of April. This makes the 5% of GDP deficit target for 2024 virtually unreachable. Given the electoral backdrop, it is unlikely that to government would adopt corrective measures on the fiscal revenues side, with reining in public spending remaining an option to insure a market-digestible deviation from the deficit target. State investments are expected to remain growth-supportive this year.

Consumption started the year on a strong footing, supported by robust real wage growth and past saving buffers. Fiscal risks, strong wage increases and the acceleration in consumer lending were cited by the NBR as reasons to delay the first rate cut. Inflation falling much faster than the latest central bank forecast should support the first rate cut at July meeting by a data-dependent NBR. The ECB rate cut in June should make NBR more confident about the timing of the easing. Local and European elections brought a landslide victory for the government coalition parties and cemented the expectations for continuity beyond the Dec-24 general elections.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusRomania
Currency in focusRomanian Leu
Sector in focus-


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