Romanian Assets Face Structural Headwinds as Taiwanese Dollar Finds Stability Amid Geopolitical Shifts

Investors navigating emerging markets in Q2 2025 confront starkly divergent landscapes: Romanian assets are weighed down by fiscal imbalances and structural weaknesses, while the Taiwanese dollar (TWD) has steadied against the U.S. dollar amid geopolitical realignments and market dynamics. Below, we dissect the risks and opportunities in both regions, supported by recent economic data and expert forecasts.

Romania: Structural Weaknesses Undermine Asset Performance

Romania’s economic outlook remains clouded by a mix of fiscal profligacy, external risks, and political uncertainty. While the government projects 3.1% GDP growth in 2025, external agencies like the World Bank and Romanian Economic Monitor (RoEM) foresee growth of just 1.3–1.5%, highlighting a critical mismatch in expectations.

Fiscal Vulnerabilities:
The general government deficit is projected to hit 7% of GDP in 2025, driven by rapid spending on public sector wages, pensions, and local infrastructure. With public debt rising to 54% of GDP, concerns are mounting about sustainability. The absence of credible fiscal consolidation plans risks deterring foreign investment, particularly in sectors like construction and manufacturing, which are already contracting.

The construction sector, a key growth engine, has seen investment decline by 3.3% in 2024, reflecting overbuilding and delayed EU Recovery and Resilience Fund (RRF) absorption. Meanwhile, the manufacturing sector’s contraction—evident in the BCR Manufacturing PMI—points to weak global demand and rising labor costs.

Political Risks:
Upcoming presidential elections in May 2025 and institutional instability, including disputes over the constitutional court, threaten to delay reforms critical to long-term growth. Without progress on structural issues like pension system reform and tax code modernization, Romania’s economy risks remaining trapped in low-growth stagnation.

Taiwan: TWD Steadies Amid Geopolitical Trade Dynamics

The Taiwanese dollar’s trajectory in May 2025 reflects a blend of market forces and strategic geopolitical shifts. After surging to a three-year high of 31.288 TWD/USD on May 2, the currency stabilized around 30.90 TWD/USD by mid-quarter, buoyed by exporter hedging and central bank inaction.

Market Drivers:
- Exporter Conversions: Taiwanese exporters, including tech giants like Taiwan Semiconductor Manufacturing Co. (TSMC), have aggressively converted USD reserves into TWD, capitalizing on the currency’s strength.
- Central Bank Policy: Taiwan’s central bank refrained from intervening despite Governor Yang Chin-long’s claims of targeting “excessive flows,” fueling speculation about tacit acceptance of a stronger TWD to gain trade leverage with the U.S.

• Geopolitical Tailwinds: Reduced U.S.-China trade tensions and hopes of a “Plaza Accord 2.0” scenario—where G7 nations coordinate to weaken the USD—have supported Asian currencies. The TWD’s 8% year-to-date appreciation aligns with broader regional trends, as Asian exporters benefit from a weaker greenback.

Sectoral Impacts:
While the TWD’s strength poses challenges for export competitiveness, strong global chip demand has shielded tech firms like TSMC from severe margin erosion. Analysts estimate a 0.4% hit to operating margins for every 1% TWD appreciation, but TSMC’s USD-denominated revenue and hedging strategies have mitigated risks.

Conclusion: Navigating Contrasting Paths

Investors in Romanian assets face significant headwinds. With growth likely to remain below 2% in 2025 and public debt exceeding 54% of GDP, fiscal slippage and delayed reforms pose existential risks. Sectors reliant on EU funds, like infrastructure, may offer limited upside, while political uncertainty looms large.

In contrast, the Taiwanese dollar’s stability reflects a strategic equilibrium. While a stronger TWD pressures exporters, the currency’s 30.90–31.46 projection for the year suggests investors can capitalize on Taiwan’s tech dominance and geopolitical trade dynamics. Caution is warranted, however: a “Plaza Accord 2.0” or renewed U.S.-China tariffs could disrupt this balance.

For now, the TWD’s steady path offers a safer bet than Romanian assets, which remain hostage to structural flaws and fiscal mismanagement. Investors should prioritize Taiwan’s tech sector while avoiding overexposure to Romanian equities until reforms materialize.

Data sources: World Bank, RoEM, Trading Economics, company reports.