The pressure to finance its high budget deficit will push Romania towards a multilateral financing agreement with international financial institutions (IFIs).

The agreement will be similar to that signed in 2009 and is likely to happen by early next year, ING Bank Romania says in its latest research report.

Romania won't be able to avoid tax hikes next year, with VAT being the main candidate here, ING analysts believe.

Separately, sovereign downgrade, although not the baseline scenario, can't be ruled out by the end of the year "amid the uncertainties posed by politics (and COVID-19)," reads the report.

ING estimates Romania's financing needs for May-December this year at RON 73 bln plus another RON 12 bln to cover for the under-funding in the first four months of the year. The Government will thus have to find RON 85 bln (EUR 17.5 bln) in the remaining eight months of the year. Relying exclusively on the market to issue anywhere close to this amount is not realistic, ING says.

The bank's analysts expected Romania to get EUR 6 bln from external bond markets this year, of which EUR 3 bln have already been raised. The stronger uptake in local bond auctions has allowed the Government to be somewhat more opportunistic and avoid challenging market conditions.

Still, ING believes Romania will eventually have to issue Eurobonds as well. Moreover, this will not be enough to avoid a multilateral financing agreement with IFIs similar to that reached in 2009, the bank's analysts believe.

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editor@romania-insider.com