Romanian Leu: S&P reprieve leaves downgrade risks – Commerzbank
Commerzbank’s Tatha Ghose says S&P’s affirmation of Romania at BBB-/A-3 with negative outlook gave the Leu short-term relief but did not remove downgrade risk. Fiscal consolidation is progressing, yet political paralysis and wide external imbalances persist.
Commerzbank's analyst Tatha Ghose states that Standard & Poor's (S&P) reaffirmation of Romania's sovereign rating at BBB-/A-3 with a negative outlook provided short-term relief for the Romanian leu, but did not eliminate the risk of a downgrade. While fiscal consolidation is underway, political gridlock and significant external imbalances remain unresolved.
Ghose anticipates the National Bank of Romania (NBR) to regain some control over the EUR/RON exchange rate, but foresees a further weakening of the leu in the coming months. S&P's assessment, which avoided an immediate downgrade, does not constitute a full resolution to the situation. The current-account deficit remains exceptionally high at 7.5% of GDP in 2026, and inflation is projected at 8.3%, higher than S&P had initially anticipated in May.
This combination of factors, including the inability to form a government, will likely trigger a downgrade if it persists. Consequently, the leu is anticipated to make a slight correction against the euro in the near term, with a more substantial decline possible in the months ahead.
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