WOOD Flash – Romania macro: an update on the budget and the economy

According to press reports, Finance Minister Alexandru Nazare has informed the European Commission that, as a result of higher-than-planned interest rate costs, high investment and high social spending, the 2025 general government budget deficit will be 8.4% of GDP, up from the earlier guidance of 7.7% of GDP and the original goal of 7% of GDP. This revision is above our recent forecast of 8% but does not come as a complete surprise, given that, on a 12-month rolling basis, the budget was at 8.8% of GDP as of July. Evidence on the strength of the economy in 3Q is still scarce, but what is available confirms a slowdown of consumer spending and weaker corporate balance sheets. However, the pace of the adjustment appears less abrupt than what we had pencilled in, also given that the budget consolidation is not as steep as planned originally, so the risk for our 2025E GDP estimate is skewed to the upside.