What Fitch Weighs Ahead of Romania's Verdict; Economist: 'Recovery After a Downgrade Takes a Very Long Time'

Romania is navigating a critical economic week, balancing parliamentary efforts to unlock €3.5 billion in EU recovery funds with an impending sovereign rating review by Fitch on July 31.

The country currently holds a position on the lowest rung of the "investment grade" category, as assessed by Fitch, Moody's, and Standard & Poor's. A single notch downgrade would relegate Romania to "junk" bond status, leading to higher borrowing costs for the state and potentially deterring international investors.

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The Ministry of Finance has presented all the data available to us, including the latest execution, in detail to all rating agencies. We have presented serious arguments why Romania deserves to maintain its rating. We have done everything in our power technically so that Romania is not downgraded, but I do not exclude this risk, it still exists. We will see Fitch's report this week and Moody's report next week. Fitch's report to be published this week is very important.

Interim Finance Minister Alexandru Nazare stated that authorities have provided all requested data to the rating agencies. While acknowledging that a downgrade cannot be entirely ruled out, he expressed confidence in Romania's arguments for maintaining its current rating, citing fiscal consolidation and stabilized macroeconomic indicators as key strengths.

Economist Adrian Mitroi, a behavioral finance professor at the Academy of Economic Studies, believes the risk of a downgrade is significantly lower than a few months ago. He points to the reduction of the budget deficit to approximately 2% as a major achievement and the government's strongest argument to rating agencies. Mitroi suggests that while the risk exists, its probability is very small, particularly given the positive fiscal developments.

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The risk of Romania being downgraded exists, but I give it a very small probability. Much smaller than I would have done a few months ago. Firstly, the reduction of the deficit to approximately 2% is a very good achievement and I believe it is the main argument the Government has at this moment.