Romania: Presidential elections could spark a significant policy shift
Outstanding result for right-wing George Simion: George Simion, a right-wing candidate, secured a decisive lead in the first round of Romania’s presidential election on May 4, winning 41% of the vote. While his victory was widely anticipated, the scale of support exceeded most expectations. Independent candidate Nicusor Dan placed second with 21%, advancing to the runoff. The great defeated of this round was Crin Antonescu, representing the ruling coalition, who failed to qualify for the next round—a result that led to the resignation of Prime Minister Marcel Ciolacu and added further uncertainty to an already fragile political landscape. The vote came after the annulment of the December presidential election, in which far-right pro-Russian candidate Calin Georgescu had unexpectedly led the first round. The Supreme Court invalidated those results, citing serious concerns over Russian meddling.
Potential policy changes on the horizon: The 18 May runoff is set to be a very close race between the two candidates. On the one hand, Simion has already pledged to appoint Calin Georgescu—the controversial winner of the annulled 2024 presidential first round—as prime minister, raising concerns of renewed political turbulence. Moreover, Simion, a self-declared supporter of President Trump, has vowed to halt Romania’s military support for Ukraine—a stance that could strain relations with the European Union. The timing is particularly sensitive, as Romania fully joined the Schengen Area on 1 January 2025, and remains engaged in broader EU integration efforts. Financial markets have responded nervously. In the aftermath of Simion’s first-round win, Romania’s 10-year bond yields surged above 8.0%, while the leu weakened sharply, breaching the 5.0 per euro threshold and hitting record lows. On the other hand, a victory for independent candidate Nicusor Dan is viewed as a more moderate option. Dan has campaigned on a more moderate platform, offering a clearer path forward for investor confidence, government stability and EU alignment.
Economic growth forecasts downgraded: Since December 2024, when the first election outcome was annulled, our panel slashed its 2025 GDP growth forecast. That said, regardless of the victor, our panelists remain upbeat on Romania’s outlook. GDP growth is expected to accelerate gradually through 2027, returning close to its 10-year pre-pandemic average of 3.2%. Moreover, our Consensus is for the new government to implement the seven-year deficit reduction plan approved by the European Commission in late January.
A Simion presidency could pose a downside risk for growth, as his political stance is likely to be met with international backlash, potentially endangering EU funding and trade, and weighing on investor sentiment. That said, much hinges on the Prime Minister nomination and in forming a new government—snap election can be held if the nominated Prime Minister cannot form a majority. Should the political turmoil continue, economic growth will likely weigh further as the pressure on the leu increases, triggering higher inflation and worsened investment sentiment.
Panelist insight: On the political outcome, Emerging Market Watch analysts said:
“We expect some political turmoil to follow, but we think the situation could settle fast and the fiscal consolidation will not be jeopardized – likely delayed a bit – if Dan wins the presidency. He was an agile negotiator with politicians on all sides while heading the capital city and implemented major projects even if he did not have majority support in the city council. We expect him to do the same as president, even with a minority government, because the establishment parties still have a cumulated majority in the parliament. At the same time, if Simion wins, we see longer political turmoil and more significant delays in fiscal consolidation, market-unfriendly changes in Romania’s foreign policy and a very likely government crisis.”
On the economic consequences, JPMorgan analysts stated:
“On the economic front, Dan is more reform-minded while Simion is focused on populist policies. They both imply some delay in implementation of fiscal reforms – though it is too early to say anything with conviction on this topic. But both are likely to support fiscal consolidation sooner or later. More concerning is that Simion has indicated a desire to bring back Georgescu (the winner of the first round back in November 2024), including as PM. He repeated such statements after he was shown to be the first-round winner (see here, in Romanian) so it is likely he will act in that direction. While Simion can be pragmatic, if the Georgescu plan is implemented, then markets are unlikely to react positively.”