In 2024, Allianz Trade upgraded the risk rating for 48 economies, 27 more than in 2023, while only five countries were downgraded, just one more than the previous year. These updates reflect a partial recovery in global economic growth and financing conditions. Most of the upgrades were concentrated in emerging markets, with Latin America recording the highest number of rating improvements (13), followed by Europe (10) and the Asia-Pacific region (9). However, only 17 of these upgrades apply to the long-term outlook, suggesting that progress is largely cyclical. In contrast, most downgrades occurred in the Middle East, including Bahrain, Israel, and Kuwait. This trend is driven by prolonged supply chain disruptions and oil prices remaining below fiscal breakeven levels.

Economic risks remain elevated in 2025-2026 despite global improvements

While the global economic outlook has improved thanks to decelerating inflation,recovering credit flows, and more favorable liquidity conditions, downside risks remain high for 2025-2026. In emerging markets, the business environment remains challenging, while developed economies face prolonged political uncertainty and imminent fiscal consolidation measures. Additionally, the risk of recession is heightened by the threat of a new trade war, while inflationary pressures could undermine business confidence, keeping companies in a prolonged ‚wait-and-see' mode. An analysis of country risk sub-ratings shows that economic recovery, compared to the pre-pandemic conditions, is particularly evident in macroeconomic indicators, which have improved globally due to progress made in 2024. The global average score has surpassed pre-pandemic levels, reaching 3 out of 6 (equivalent to a BB rating). However, the Structural Business Environment (SBE) remains below pre-pandemic levels, with an equivalent B rating. In 2024, 18 countries, including Saudi Arabia, Taiwan, Japan, Romania, and Chile, experienced a deterioration in their business climate.

Although some partial improvements have been recorded due to the normalization of business insolvencies, commercial risk remains below pre-pandemic levels. In 2024, the number of insolvencies increased in two out of three countries, and large firms were not immune to this trend. Last year, more than one insolvency per day was recorded among companies with a turnover exceeding €50 million—a record high. For 2025, Allianz Trade analysts expect the Global Insolvency Index to reach a stable level after three consecutive years of increase. However, insolvencies will continue on an upward trend, affecting countries that account for 50% of global GDP, including the U.S., Germany, Italy, Spain, and China.

Macroeconomic imbalances remain a cause for concern

The economy benefits from EU membership and strong international relations, supported by a competitive industrial sector, low unemployment, and an adequate business environment. However, government instability and the lack of structural reforms in key economic sectors remain major challenges.

The weak financial position of the public sector, large current account deficits—only partially covered by foreign direct investment—and the high external debt burden pose additional risks to macroeconomic stability.

Romania: Between strong performance and challenges 

Romania has been one of the strongest-performing emerging economies, but periods of rapid economic growth accompanied by imbalances have raised concerns. Over the past two decades, real GDP has grown at an average annual rate of +3.7%, surpassing the average of Central and Eastern European EU member states.

The economy was significantly impacted by the global pandemic-induced crisis in 2020 (-3.7%) but rebounded with a 5.7% expansion in 2021. However, economic prospects deteriorated sharply following the outbreak of the war in Ukraine due to Romania's prior dependence on energy imports from Russia and the impact of EU sanctions, which exacerbated inflation and increased the risk of energy shortages.

Supported by robust consumer spending, Romania's economy proved more resilient than expected in 2022, with investments and external demand driving a +4.1% growth. However, rising inflation, high interest rates, weakening external demand, and declining business confidence slowed economic expansion in 2023, with real GDP advancing by only +2.1%. In 2024, the economy decelerated further, growing by just +1.4% in the first half of the year, followed by a contraction of -0.3% in Q3, resulting in a modest annual increase of only +0.8%.

For 2025 and 2026, analysts anticipate an acceleration in economic growth to +3.1% and +3.6%, respectively, driven by resilient public investments, a recovery in domestic consumption, and the gradual easing of monetary policy. Although the National Bank of Romania (NBR) aims to keep inflation stable at 2.5% ± 1pp, monetary policy has remained loose for an extended period. The real interest rate was negative between 2017 and October 2023, while inflation reached double-digit levels between 2022 and 2023, largely due to rising energy prices.

The National Bank of Romania (NBR) raised its key interest rate from 1.25% in September 2021 to 7.00% in January 2023 to curb rising prices. Then, in July 2024, it began gradually lowering the rate, which now stands at 6.5%.

The central bank has also frequently intervened in foreign exchange markets to maintain the stability of the RON/EUR exchange rate—a strategy that is expected to continue as long as sufficient FX reserves are available.

Inflation is projected to remain more persistent than in neighboring economies, driven by strong wage growth, rising food prices, and loose fiscal policies. After reaching 5.6% in 2024, inflation is expected to decline to 4.5% in 2025 and 3.4% in 2026.

Concerning public and external finances

In Romania, public finances continue to deteriorate, becoming a growing concern. Pro-cyclical fiscal stimulus measures led to an increase in the budget deficit to -4.3% of GDP in 2019, with the imbalance worsening significantly in 2020 (-9.3%) and 2021 (-7.2%) due to economic support measures related to the Covid-19 pandemic.

In 2022-2023, the annual deficit remained elevated at over -6% of GDP, reflecting both declining tax revenues and increased spending in response to the crisis triggered by the war in Ukraine. Although fiscal consolidation measures are planned, the deficit is expected to remain above -5% of GDP during 2024-2026. At the same time, public debt has risen from 35% of GDP in 2019 to 49% in 2023, with projections indicating it will exceed 50% in the 2024-2026 period.

Another major concern for Romania's economy is its external finances. The current account deficit—the gap between the country's imports and exports—has steadily widened, reaching -9.3% of GDP in 2022 and remaining high at over -7% in 2023-2024.

A particularly worrisome aspect is that only 30% of this deficit was covered by foreign direct investment (FDI), far below the 75% threshold considered sustainable. Moreover, this share has dropped significantly from 2016, when FDI covered 168% of the deficit.

For 2025-2026, exports and imports are expected to grow at a similar pace, keeping the current account deficit above -6% of GDP. At the same time, its coverage through FDI will remain below 50%, as capital flows to weaker emerging markets are likely to stay muted amid ongoing global economic uncertainties. This situation, combined with high fiscal deficits, could push external financing needs to critical levels. On the other hand, the NBR's foreign exchange reserves have recovered from the temporary lows of 2022, reaching $70 billion in August 2024, equivalent to five months of imports—a level considered adequate. However, these reserves do not fully cover external debt payments due in the next 12 months, falling below the 125% comfort threshold.

Regarding Romania's business environment, it is generally favorable, though certain vulnerabilities persist. The World Bank's annual Worldwide Governance Indicators suggest that regulations and the legal framework are broadly business-friendly, but the perception of corruption remains a concern. The 2024 Index of Economic Freedom by the Heritage Foundation ranks Romania 51st out of more than 180 economies, highlighting strengths in property rights, tax burden, trade freedom, and investment freedom. However, weaknesses remain in areas such as government integrity and financial freedom.

In Allianz Trade's Environmental Sustainability Index, Romania ranks 54th out of 210 economies, showing strong performance in energy efficiency, CO₂ emissions per unit of GDP, and water stress. However, vulnerabilities persist in renewable energy production, recycling rates, and climate risk adaptation capacity.

Regarding systemic political risk, it remains moderate, but political volatility is high. Political uncertainty continues to impact fiscal consolidation prospects. In December 2024, the Constitutional Court annulled the presidential elections following allegations of foreign interference, leading to new elections being scheduled for spring 2025. Although a new pro-European coalition government of four parties has been formed, its stability remains uncertain.