3 minutes to read by  BlueBay Fixed Income team, T.Ash Dec 5, 2024

With the Romanian election creating market volatility and driving alpha opportunities for active investors, Tim Ash, Senior EMD Sovereign Strategist, shares his thoughts on the recent poll-topping victory of hard-right candidate, Calin Georgescu.

The only word that can be used to describe Georgescu’s first-round presidential election win in Romania over the weekend of 23/24 November is ‘meteoric’. Georgescu will next go head-to-head in the second-round run-off with the pro-EU reform candidate for the Save Romania Union (USR) party, Elena Lasconi, at the start of December.

Pro-Putin and populist

Georgescu’s win is being painted as another victory for a pro-Putin politician, following Orban in Hungary, Fico in Slovak and Dream in Georgia. There is some pro-Russian, anti-Western politicking in there for sure, as fatigue with the war in Ukraine is widespread in Romanian society and, indeed, in many places in Europe.

However, there are three other broad conclusions from this win:

1.       Political influence: Georgescu’s victory shows the power of new forms of political influence and campaigning and the dangers, therein, to democracy more generally. Georgescu ran a hugely impactful, last minute, social media campaign.

2.       Populism: in the current global political setting, populism is popular. Mass migration has elevated voter sensitivities around immigration, and especially in places where post-Covid populations have been hard hit by the cost-of-living crisis.

3.       Incumbents in retreat: we’ve seen this across the globe this year, whether with Biden and the Democrats in the US, the ANC in South Africa, Erdogan in local elections in Turkey, Modi in India, and the Conservatives in the UK.

However, it must be remembered that Georgescu still only secured 23% of the vote in the first round and, even assuming the votes of the other nationalist candidate, George Simion, also go to Georgescu, the total is still only 37% of the vote. This is still some way off the 51% required in the run-off vote in December.

Set against that, the combined votes of pro-EU candidates from the PSD, PNL, USR, UDMR et al come to 58%.

Much to lose?

Additionally, the power of EU fund flows cannot be under-estimated in Romania. Under the latest EU budget cycle for 2021-2027, adding in RRF facilities, Romania is slated to secure over EUR83 billion in EU funding[1], as the biggest net beneficiary from such funds in the EU. As a percentage of GDP that runs at 3-4% annually, this covers half the budget deficit and current account deficit.

A Georgescu presidency would deteriorate relations with the EU and risk these fund flows, as has been the case in neighbouring Hungary with Orban.

The question is: would voters really risk the economic prosperity of the country by voting for Georgescu to actually assume the presidency? Some voters might think they have seen little personal benefit from EU structural fund flows (as the political elites have) and think they have nothing to lose.

The Romanian election is a good example of how policy and politics creates volatility. In turn, this creates alpha opportunities for active investors, such as ourselves.

[1] Ministry of Finance of Romania

Now is the time to invest in EMD. Learn more.

Disclosure

This material is provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC GAM or the relevant affiliated entity listed herein. RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management Inc. (RBC GAM Inc.), RBC Global Asset Management (U.S.) Inc. (RBC GAM-US), RBC Global Asset Management (UK) Limited (RBC GAM-UK), and RBC Global Asset Management (Asia) Limited (RBC GAM-Asia), which are separate, but affiliated subsidiaries of RBC.

In Canada, the material may be distributed by RBC GAM Inc., (including PH&N Institutional), which is regulated by each provincial and territorial securities commission. In the United States (US), this material may be distributed by RBC GAM-US, an SEC registered investment adviser. In the United Kingdom (UK) the material may be distributed by RBC GAM-UK, which is authorised and regulated by the UK Financial Conduct Authority (FCA), registered with the US Securities and Exchange Commission (SEC), and a member of the National Futures Association (NFA) as authorised by the US Commodity Futures Trading Commission (CFTC). In the European Economic Area (EEA), this material may be distributed by BlueBay Funds Management Company S.A. (BBFM S.A.), which is regulated by the Commission de Surveillance du Secteur Financier (CSSF). In Germany, Italy, Spain and Netherlands the BBFM S.A. is operating under a branch passport pursuant to the Undertakings for Collective Investment in Transferable Securities Directive (2009/65/EC) and the Alternative Investment Fund Managers Directive (2011/61/EU). In Switzerland, the material may be distributed by BlueBay Asset Management AG where the Representative and Paying Agent is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich, Switzerland. In Japan, the material may be distributed by BlueBay Asset Management International Limited, which is registered with the Kanto Local Finance Bureau of Ministry of Finance, Japan. Elsewhere in Asia, the material may be distributed by RBC GAM-Asia, which is registered with the Securities and Futures Commission (SFC) in Hong Kong. In Australia, RBC GAM-UK is exempt from the requirement to hold an Australian financial services license under the Corporations Act in respect of financial services as it is regulated by the FCA under the laws of the UK which differ from Australian laws. All distribution-related entities noted above are collectively included in references to “RBC GAM” within this material.

This material is not available for distribution to investors in jurisdictions where such distribution would be prohibited.

The registrations and memberships noted should not be interpreted as an endorsement or approval of RBC GAM by the respective licensing or registering authorities.

This material does not constitute an offer or a solicitation to buy or to sell any security, product or service in any jurisdiction; nor is it intended to provide investment, financial, legal, accounting, tax, or other advice and such information should not be relied or acted upon for providing such advice. Not all products, services or investments described herein are available in all jurisdictions and some are available on a limited basis only, due to local regulatory and legal requirements. Additional information about RBC GAM may be found at www.rbcgam.com. Recipients are strongly advised to make an independent review with their own advisors and reach their own conclusions regarding the investment merits and risks, legal, credit, tax and accounting aspects of all transactions.

Any investment and economic outlook information contained in this material has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, expressed or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions in such information. Opinions contained herein reflect the judgment and thought leadership of RBC GAM and are subject to change at any time without notice.

Some of the statements contained in this material may be considered forward-looking statements which provide current expectations or forecasts of future results or events. Forward-looking statements are not guarantees of future performance or events and involve risks and uncertainties. Do not place undue reliance on these statements because actual results or events may differ materially.

® / TM Trademark(s) of Royal Bank of Canada. Used under licence.
© RBC Global Asset Management Inc., 2025

document.addEventListener("DOMContentLoaded", function() { let wrapper = document.querySelector('div[data-location="inst-insight-article-additional-resources"]'); if (wrapper) { let liElements = wrapper.querySelectorAll('.link-card-item'); liElements.forEach(function(liElement) { liElement.classList.remove('col-xl-3'); liElement.classList.add('col-xl-4'); }); } }) .section-block .footnote:empty { display: none !important; } footer.section-block * { font-size: 0.75rem; line-height: 1.5; }