A recent analysis reveals that many investors view Romania with reluctance because of the 2% GDP deficit. Investors are concerned about the Romanian market, and this is underlined by the fact that Romanian government bonds have a yield of 6.89%, the EU average being 3%.
We remind you that the economic situation in Romania is difficult due to the considered irresponsible measures taken by the PSD-PNL Government.
Investors look with reluctance at Romania, which has a deficit of 2% of GDP
On foreign markets, Romanian government bonds with a maturity of 10 years are quoted at a yield of 6.89%, according to the investing.com platform. In comparison, Polish government bonds are quoted at 5.7% and Bulgarian bonds at 4%. As for Hungary, the country with the most complicated political situation in the EU, its 10-year government bonds are quoted at a yield of 6.8%. Investors look at Romania with reluctance because of the deficit of 2% of GDP. However, even if the yield of government bonds seems good in Romania, the situation is at the opposite pole.
The 10-year government bond yield is considered an indicator of a country’s cost of borrowing. The higher the perceived risk of a country, the higher the cost of borrowing. Hungary, which has taken opposing positions on key EU and NATO decisions, including support for Ukraine in its conflict with Russia, typically faces a higher borrowing cost in the EU.
The economy is going down because of the Marcel Ciolacu Government
However, Romanian government bonds are quoted at higher levels. Marcel Ciolacu’s government recorded a budget deficit of over 2% of GDP in the first two months of the year, against the background of a 23% increase in expenses, reaching 132 billion lei, while revenues increased by only 16%, up to 168 billions of lei. The difference between revenues and expenses was 36 billion lei, and if this trend continues, the budget deficit could reach 144 billion lei by the end of 2024, representing 8.3% of GDP, well above the government’s target of 5 %.
In this context, investors notice these figures and Romania finds itself with a higher interest rate on government securities than Hungary.
Government bonds issued by the European Commission are quoted at 3%. The lowest quotes in the EU are for Germany (2.46%), Denmark (2.48%), the Netherlands (2.76%) and Ireland (2.85%). The yield on government securities represents the effective interest rate at which a security trades, reflecting the evolution of interest rates and the impact of domestic and external events. Although a security is issued with a fixed interest rate and a specific maturity, its price changes daily in the financial markets based on demand, supply and current events. In conclusion, in addition to the huge GDP deficit, Romania also has the highest inflation rate in the European Union. Not even Hungary has such an inflation rate. In this context, we must emphasize the need for 2024 to be a year of change in which sovereignists, patriots, people who want to change the country for the better and reduce the deficit in Romania will come to power.
