WOOD Flash – Romanian elections - Social Democrats in the lead on promises of more fiscal stimulus

As indicated previously by opinion polls and in line with the market’s expectations, the Social Democrats (PSD) are in the lead for forming a new government alone or in a coalition with ALDE (former Prime Minister Tariceanu’s party). In yesterday’s elections, they received close to 52% (PSD+ALDE) of the votes and could get additional votes from the redistribution from the parties that did not cross the 5% parliamentary threshold. We do not expect any major shifts from the policies implemented so far, but potentially more fiscal stimulus if the new government keeps some of the promises made during the campaign. According to the Social Democrat party’s official programme, the source of more fiscal relaxation should be extra revenues in the budget generated by continuous economic growth and the multiplier effect. Still, we also note the risks of the budget deficit slipping above 3%, cuts in investments spending or the raising of other taxes to compensate for the higher deficit.