International rating agency Moody’s has completed its periodic review of Romania’s sovereign rating, maintaining the country at Baa3 — the lowest investment-grade level — with a negative outlook, and signalling that further rating decisions will depend on the clarity and implementation of the government’s fiscal consolidation strategy.

Moody’s said the outlook could improve only if Romania fully and effectively implements the fiscal consolidation programme adopted in 2025 and continues deficit reduction beyond 2026. However, the agency stressed that the government’s plans for fiscal consolidation in 2027 and subsequent years remain unclear.

“Reform fatigue, the rotation of the premiership within the four-party governing coalition in the first half of 2027, as well as parliamentary elections in 2028, all raise risks to the prospect of further deficit reduction and a stabilisation of the debt burden at a level that is still commensurate with a Baa3 rating,” the agency said.

Moody’s also noted that Romania’s credit profile is weaker than that of similarly rated countries in areas such as control of corruption and the effectiveness of fiscal policy, reflecting somewhat weaker institutional and governance frameworks.

Although Romania’s government debt ratio is currently broadly in line with that of rating peers, Moody’s expects the debt burden to increase in the coming years due to the still-high fiscal deficit.

Failure to implement the fiscal consolidation plan — which envisages a deficit of 6.3% of GDP in 2026 and 5.7% in 2027 under the EU’s ESA methodology — could lead to a downgrade that would push Romania’s sovereign rating into non-investment-grade territory.

Moody’s projections broadly align with Romania’s seven-year fiscal adjustment plan prepared under the European Union’s Excessive Deficit Procedure (EDP).

The agency expects Romania’s deficit to decline to 6.3% of GDP this year under the ESA methodology, from an estimated 8.2% in 2025. The European Commission has not yet published its official ESA-based estimate for last year, although Romanian authorities calculated the deficit at 7.65% of GDP under the national cash methodology.

While Moody’s described the expected fiscal adjustment as “a very significant fiscal consolidation effort,” it warned that public debt will likely continue rising unless additional measures are adopted after 2026.

Assuming the deficit declines to 5.7% of GDP by the end of 2027, the agency estimates Romania’s government debt will increase to 62.9% of GDP by that time, up from about 60.5% at the end of 2025. Debt is expected to continue rising gradually before stabilising at around 65% of GDP toward the end of the decade.

Moody’s acknowledged that several reforms adopted in 2025, including measures aimed at improving tax collection, could generate recurring reductions in the budget deficit in the coming years. However, the agency reiterated that there is still limited clarity on the government’s strategy for reducing the deficit beyond 2026.