WOOD Flash – Romania macro: coalition government's plan – macro and stock exchange perspective

Yesterday (25 November), Parliament endorsed the PSD, PNL and UDMR coalition government led by PM Ciuca. We have studied the coalition government’s plan for 2021-24, released in the press; and, here, we highlight some of the points from the document, which we deem interesting. Overall, the document is on the constructive side of what we were expecting as, in the past few weeks, we have been concerned about some press articles, mentioning a potential renegotiation of the PNRR. Still, on the downside, the bulk of the plan focuses on additional spending and regulatory reforms, rather than improvements in productivity. Even though the document states that the implementation of the programme must be in line with the deficit and objectives assumed by the PNRR, this focus puts upward risks on our deficit to GDP forecasts, which stand at -7.5% in 2021E, -6.5% in 2022E and -5.8% in 2023E currently. These risks are bound to return to the spotlight next year, in our view, as the PNNR disbursements are conditional on budgetary consolidation, and the stability and growth pact (SGP), in some form, will be reinstated in 2023E.