Romania’s financing risks have increased markedly amid a pronounced deterioration in both public and external balances, resulting in a widening twin-deficit position. The fiscal deficit rose sharply to 8.7% of GDP in 2024, driven by large pension and public wage increases as well as elevated election-related spending. At the same time, the current account deficit widened to 8.2% of GDP, reflecting strong import growth, weak export performance and a deterioration in cost competitiveness. As a result, Romania’s external position is assessed as substantially weaker than implied by fundamentals and desirable policies. 

Despite maintaining an investment-grade sovereign credit rating, all major rating agencies have revised the outlook to negative, underscoring concerns about fiscal sustainability and financing vulnerabilities. The widening current account deficit has increasingly been financed through debt-creating flows, with portfolio and other investment accounting for more than two-thirds of external financing, increasing exposure to shifts in global risk sentiment. 

The authorities have adopted a sizeable fiscal reform package aimed at restoring fiscal and external balance, including tax increases and expenditure restraint measures. However, financing risks remain elevated due to still-large deficits, rising public debt and slow absorption of EU funds, with NGEU disbursement at around 38% and structural funds near 17% of committed amounts as of mid-2025. Weak administrative capacity and procurement bottlenecks continue to weigh on investment execution. Overall, Romania’s financing risks are high, reflecting the interaction between fiscal slippage, external imbalances and constrained policy buffers.

The business environment is generally adequate, though pockets of weakness remain. The World Bank Institute’s annual Worldwide Governance Indicators surveys suggest that regulatory and legal frameworks are generally business-friendly, while weaknesses persist with regard to perceived corruption. The Heritage Foundation’s Index of Economic Freedom 2025 ranks Romania 51st out of more than 180 economies, reflecting strong scores in property rights, tax burden, trade freedom and investment freedom. However, weaknesses remain in government integrity and fiscal health. 

In Allianz’s proprietary Environmental Sustainability Index, Romania ranks 54th out of 210 economies, reflecting favorable scores for energy use and CO₂ emissions per GDP as well as water stress. At the same time, structural gaps persist in renewable electricity output, recycling rates and resilience to climate events, which could weigh on longer-term competitiveness and investment attractiveness. 

Romania experienced a period of heightened political volatility in 2024–25, marked by an unusually contentious presidential election cycle. The initial presidential vote in late 2024 was annulled following credible allegations of foreign interference and campaign irregularities, triggering institutional tensions, protests and elevated political uncertainty. The rerun election in May 2025 ultimately resulted in the victory of pro-European independent candidate Nicușor Dan, defeating hard-right challenger George Simion and easing concerns about a potential shift away from Romania’s pro-EU and pro-NATO orientation. 

The resolution of the electoral dispute and the formation of a new governing coalition in mid-2025 have helped restore short-term political stability and reduced immediate policy uncertainty. However, the episode highlighted persistent societal polarization, declining trust in institutions and the growing appeal of anti-establishment forces. While democratic institutions proved resilient, political risks remain elevated relative to the past, particularly around reform implementation, coalition cohesion and public support for fiscal consolidation. Overall, the near-term political environment is more stable, but medium-term risks linked to governance and social fragmentation persist.