Page 6 - bne IntelliNews Southeastern Europe Outlook 2025

Executive summary
Southeast Europe’s largest economy, Romania, entered 2025 in a state of uncertainty. After the unprecedented decision to cancel the presidential election at the end of 2024, new elections are due to be scheduled for early 2025, but the date is as yet unknown. In the meantime, the two former ruling parties, the Social Democratic Party (PSD) and National Liberal Party (PNL) have formed a new government – but its long-term stability depends on the outcome of the presidential election.
Calin Georgescu, the far-right, pro-Russian candidate whose first round victory led to the decision to cancel the presidential election, still leads in recent polls. If he is allowed to run again, he would almost certainly make it to the second round, and could emerge as Romania’s next president.
It’s as yet unclear who the ruling coalition will back; Prime Minister Marcel Ciolacu is staying out of the race after his poor showing last time, while the coalition’s pick for the re-run, Crin Antonescu, has suspended his presidential bid. Bucharest mayor Nicusur Dan is the most prominent candidate committed to running for president, but is polling well behind Georgescu.
Despite the lack of clarity about Romania’s political direction, Romania’s new government has endorsed a draft first fiscal corrective package, with an estimated combined budgetary impact of around 1% of GDP in 2025. This is in line with the annual fiscal consolidation target envisaged under the European Commission’s Excessive Deficit Procedure (EDP) plan but roughly half of the actual consolidation effort needed. With the presidential election in mind, the government tried to sweeten the pill, denying it is an austerity package, but it still met with strong criticism by affected groups from business leaders to public sector employees.
Meanwhile, the controversy over the presidential election and lack of future clarity have been damaging to Romania’s reputation among investors. In December, Fitch Ratings revised the outlook on Romania's long-term Issuer Default Rating (IDR) to negative from stable, while affirming the IDR at BBB-.
Bulgaria is in a similar state of political flux – and has been since early 2021. Since then there have been seven general elections, each leading to fragmented parliaments, while the country is ruled by either caretaker governments or short-lived, unstable coalitions. The latest vote in October 2024 was no different, and Bulgaria is likely heading for yet another election in spring 2025, with no clear prospect of a route out
6 SE Outlook 2025 www.intellinews.com