The CFA Society Romania's Macroeconomic Confidence Indicator (MCI) increased by 7.3 points m/m in March to 43.9 points, reversing the 3.8-point loss seen in February, but remaining in the "negative" area of the 0-100 scale according to a press release.
Illustrating the puzzling outlook faced by Romania's economy, the improvement in analysts' sentiment was driven by an improved "expectations" component – while the forecast for this year's economic growth was trimmed down, and the Society felt appropriate to introduce a supplementary question about the likelihood of a sovereign downgrade (to junk) that revealed that one in five analysts would not be surprised by such a dramatic development.
The surge in the MCI in March was exclusively due to the increase in the expectations component of the indicator – which was at a very low level of 32 points in February, well below the 45.9-point level of the current conditions at that time. The current conditions component remained relatively steady, CFA Society Romania says.
The state budget deficit forecast for 2025 remained similar to the previous year at the average value of expectations of 7.4% of GDP.
Economic growth expectations for 2025 are down from February, at an average value of 1.0%, with opinions among participants regarding a possible entry into recession of the Romanian economy.
Public debt, calculated as a percentage of GDP, is expected to increase to 58% in the next 12 months.
An additional question introduced in the survey refers to the expectations regarding Romania's downgrade to the non-investment grade ("junk"). Thus, according to the results, 82% of the participants anticipate Romania's maintenance in the next 12 months in the investment grade rating category, while 18% anticipate a downgrade to junk.
For comparison, from a statistical point of view, when the outlook of an issuer is revised from "neutral" to "negative," in one out of three cases, it is downgraded in the next 12 months. Also, the weaker the rating (e.g., BBB-, BB+), the higher the risk of a downgrade after a negative outlook, the CFA press release states.
iulian@romania-insider.com
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