After a lacklustre 2024, Romania’s economy was on course to pick up speed at the start of 2025, due, in particular, to construction, agriculture and services, and better export prospects. However, the uncertainties generated by the imposition of US tariffs, and also by heightened domestic political and fiscal volatility are expected to dampen exports, economic sentiment, and ultimately investment and consumption. This is expected to result in only moderate real GDP growth of 1.4% in 2025 that is set to further strengthen to 2.2% in 2026. Inflation is projected to ease, but to remain high, while unemployment is projected to decline marginally. The general government deficit was 9.3% of GDP in 2024, fuelled by very large increases in public wages and pensions. It is projected to decline modestly to 8.6% of GDP in 2025 and 8.4% in 2026, reflecting a package of measures implemented at the end of 2024.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 0,8 | 1,4 | 2,2 |
| Inflation (%, yoy) | 5,8 | 5,1 | 3,9 |
| Unemployment (%) | 5,4 | 5,3 | 5,2 |
| General government balance (% of GDP) | -9,3 | -8,6 | -8,4 |
| Gross public debt (% of GDP) | 54,8 | 59,4 | 63,3 |
| Current account balance (% of GDP) | -8,5 | -7,9 | -7,0 |
Modest pick-up in growth amid high uncertainty
Economic sentiment remained in positive territory at the beginning of 2025, despite economic headwinds and persistent uncertainty. Construction, agriculture and transport services show improved performance prospects, also helped by the Schengen membership and infrastructure upgrades. A strong rebound in residential construction together with robust EU-funded investment in public infrastructure bode well for a recovery in gross fixed capital formation, despite private investment being negatively impacted by pronounced fiscal uncertainty and geopolitical volatility. At the same time, high frequency indicators point to a deceleration of retail sales and private consumption, as restrictive income policies and still high inflation are likely to depress growth in disposable income.
While Romania has only limited trade with the USA, the US increase in tariffs is expected to limit the recovery of Romania’s exports, in particular of manufactured goods, due to the negative impact on Romania’s EU trading partners. The negative contribution of net exports to GDP growth is forecast to drop in 2025 as deceleration in domestic demand lowers import growth, and prospects for exports of services and agricultural products improved. Overall, real GDP growth is projected to pick up only modestly to 1.4% in 2025, below potential.
In 2026, lower inflation and the easing of monetary policy leading to more favourable financing conditions are expected to support private consumption growth. Assuming that political and fiscal uncertainty subsides, investor confidence will strengthen, accelerating the recovery in gross fixed capital formation. With better growth prospects for EU trading partners, exports are expected to gain further traction, but the contribution of net exports to GDP growth is projected to remain slightly negative. Overall, real GDP growth is set to moderately strengthen to 2.2%. After a significant widening in 2024, the current account deficit is projected to narrow progressively, but remain at still high levels of close to 8% of GDP in 2025 and 7% of GDP in 2026. Risks to the forecast are tilted to the downside, in particular if domestic political and fiscal uncertainty persists and external demand suffers a larger hit than estimated.
Wage increases to moderate over the forecast horizon
Labour market tensions have eased and employment growth is set to continue in both 2025 and 2026, primarily supported by more hirings in the private sector. The unemployment rate is projected to decline further to close to 5% by end-2026. The double-digit growth in nominal wages continued in 2024, affecting cost competitiveness, but the pace of wage increases is projected to moderate significantly over the forecast horizon. A freeze in public wages was enacted in December 2024 and the introduction of a minimum wage setting mechanism in February 2025 is likely to contain further large increases in private sector wages.
Disinflation process to remain bumpy
After a notable decline in HICP inflation to 5.8% on average in 2024, disinflation is likely to continue, but only slowly in 2025. Headline inflation excluding energy and foods, in particular of services, remains sticky and the foreseen eliminiation of the cap on electricity prices for households is expected to push up domestic energy prices. Conversly, the evolution of agri-food and international energy prices may contribute to lowering inflation. Overall, average HICP inflation is projected to decline marginally to around 5% in 2025 and follow a more pronounced downward trend to below 4% in 2026.
Government deficit is projected to decline gradually in 2025 and 2026
Romania’s general government deficit reached 9.3% of GDP in 2024, fuelled by large increases in public sector wages, interest payments, and pensions.
At the end of 2024, the parliament adopted a package of fiscal consolidation measures worth around 2% of GDP. The package includes a nominal freeze in public wages and pensions, and revenue measures amounting to 0.3% of GDP. As a result, the deficit is projected to decline to 8.6% of GDP in 2025 and, under unchanged policies, to 8.4% in 2026. This forecast does not include the impact of the tax reform and other measures planned in Romania’s MTFSP, which if properly designed and timely implemented have the potential to materially lower the deficit in 2025 and, to a greater extent, in 2026. Government debt is projected to increase from 48.9% of GDP in 2023 to about 63% of GDP in 2026, mostly driven by high government deficits and a projected increase in interest payments.