Romania: Presidential elections could spark a significant policy shift
An unexpectedly strong result for right-wing candidate George Simion: George Simion, a right-wing nationalist, 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 far exceeded that suggested by most prior opinion polls. Independent candidate Nicusor Dan placed second with 21%, advancing to the runoff. Financial markets have responded nervously: In the aftermath of Simion’s first-round win, Romania’s 10-year government bond yields surged above 8%, while the leu weakened sharply, surpassing RON 5 per EUR and hitting record lows.
Still, the biggest surprise of the night was the resignation of Prime Minister Marcel Ciolacu as a result of Crin Antonescu—a candidate put forth by the ruling coalition government—failing to qualify for the next round. This added further uncertainty to an already fragile political landscape: May’s vote was a redo 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 concerns over Russian meddling.
Potential policy changes on the horizon: Simion’s first-round advantage over Dan means he is now in pole position to win the 18 May runoff. Though the president is a largely ceremonial figure in Romania, a Simion victory would likely bring a significant policy shift. The far-right candidate pledged to appoint Georgescu as prime minister, raising concerns of renewed political turbulence. Moreover, Simion is a self-declared supporter of President Trump and has vowed to halt Romania’s military support for Ukraine—stances that could strain relations with the EU given its rising trade tensions with the U.S. plus support for Ukraine and rearmament. The timing is particularly sensitive, as Romania fully joined the Schengen Area on 1 January and remains engaged in broader EU integration efforts; the country should adopt the euro in 2029.
On the flipside, Dan is viewed as a more moderate option. He has campaigned on a pro-reform platform, and would likely look to accelerate fiscal consolidation. His election would offer a clearer path forward for investor confidence, government stability and EU alignment.
Economic growth forecasts downgraded: Our panel has slashed its 2025 GDP growth forecasts so far this year, following the annulment of the first presidential elections and the introduction of U.S. global tariffs. That said, our panelists remain fairly upbeat on Romania’s outlook: GDP growth is expected to accelerate gradually through 2027, nearing its 10-year pre-pandemic average of 3.2%, driven by EU funds inflows and Schengen Area integration.
Moreover, regardless of the victor, the policy agenda of the new government will also be critical to the implementation of the seven-year deficit reduction plan approved by the European Commission in late January, which seeks to drive the fiscal deficit to 2.5% of GDP by 2031.
Downside risks to GDP growth loom amid policy uncertainty: A Simion presidency could pose a downside risk for growth. His political stance is likely to be met with international backlash, potentially endangering EU funding, leading to EU fines and weighing on investor sentiment. That said, much hinges on the new president’s nomination of prime minister and government formation—snap elections can be held if the nominated prime minister cannot form a majority. Prolonged instability would likely hamper economic growth, as increased pressure on the leu would trigger higher inflation. Moreover, a potentially Eurosceptic populist government could risk to balloon further the fiscal shortfall and weaken investor 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 […] 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, EIU analysts stated:
“The election of a far-right and anti-European president will at the very least affect the smooth operation of government and lead to rising tensions with the EU on the foreign policy front. It could yet lead to the inclusion of the far right in government.”