Foundations for Growth and Competitiveness 2026

Romania

Romania’s income convergence with OECD countries has continued, driven largely by gains in labour productivity. However, labour force participation remains low by OECD standards. A shrinking working-age population is expected to increasingly weigh on long-term growth. Capital deepening has significantly contributed to productivity growth, supported in part by EU funds.

Enhancing labour force participation among women, youth, and older individuals in the formal labour market would strengthen overall labour utilisation. Further improvements in educational attainment and performance, along with efforts to reduce the urban-rural divide, would support productivity growth. Other key priorities include sustaining efforts to combat corruption and improving the overall business environment, notably by addressing tax distortions and boosting the development of digital skills.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Labour market: Enhance the integration of women, youth, and vulnerable groups

Labour force participation in Romania remains among the lowest in the OECD, despite some improvement over recent years. This is particularly due to low participation rates in the formal labour market among youth, women, older individuals, and Roma communities. Also, the share of young people not in employment, education, or training (NEET) remains high.

Recommendations

✓ Reduce the relatively high tax and social security burden on low-income/low-skilled workers and for the second earner, to strengthen their attachment to the labour market.

✓ Expand access to quality formal early childhood education and care.

✓ Enhance the quality and relevance of VET programmes, by ensuring that they are aligned with labour market needs and accelerate policies to support students at risk of dropping out of school.

Education: Address gaps in attainment and equity

Despite a significant increase, Romania has the lowest tertiary attainment rate compared to OECD countries. Educational performance, as measured by PISA scores, falls below the OECD average. Moreover, there is a high degree of inequality in educational achievement, with significant disparities between urban and rural areas. Access to quality education is uneven across the country, contributing to large regional gaps in both attainment and student performance.

Recommendations

✓ Allocate more public resources to schools located in rural and disadvantaged areas, by revising the overall funding mechanisms.

✓ Continue efforts to strengthen teacher education, including a stronger emphasis on job-embedded learning programmes.

✓ Review and enhance the curriculum and student assessment framework, with a particular focus on strengthening competencies in reading, mathematics, and science.

Governance: Continue the fight against corruption

While Romania has made notable and sustained progress in tackling corruption over recent years, challenges remain. Weak implementation and limited enforcement of anti-corruption measures have allowed corruption risks to remain relatively elevated compared to the OECD average. Issues such as corruption in public procurement and delays in judicial proceedings continue to weigh on business confidence.

Recommendations

✓ Enhance transparency and oversight in public procurement by strengthening internal managerial control and civil society scrutiny and reinforce conflict-of-interest management.

✓ Ensure that the reformed pre- and post-public employment and lobbying framework are effectively implemented.

✓ Review the system of preliminary hearings in corruption cases and address shortages of magistrates.

Taxation: Raise revenue while reducing tax distortions

A high tax wedge for low-income earners discourages formal employment and limits redistribution. At the same time, taxes on capital, including property, remain relatively low while reduced VAT rates reduce the consumption tax base. Weak tax compliance and informality contribute to the EU’s largest VAT compliance gap. The low-rate microenterprise tax allows small firms to avoid regular corporate taxes. Also, government revenue as a share of GDP remains well below the OECD average.

Recommendations

✓ Reduce the high tax wedge for low-income earners by increasing the progressivity of income taxation.

✓ Broaden the value added tax base through more uniform application of the standard rate.

✓ Strengthen tax enforcement to increase VAT compliance.

Digitalisation: Improve digital skills

Poor digital skills constrain Romania’s ability to fully benefit from digital technologies. While broadband services are well developed, a large share of people does not have basic digital skills nor use digital tools. Despite recent progress, many businesses lag in the adoption of digital technologies, including artificial intelligence.

Recommendations

✓ Foster digital skills in formal education curricula by continuing efforts to train teachers and to channel resources to investments in IT equipment for classrooms.

✓ Improve adults’ access to digital skills training by increasing the availability of flexible programmes and by offering incentives to boost participation of vulnerable groups.

✓ Facilitate wider uptake of digital services among businesses by improving awareness and access to digital support programmes.

Recent progress on structural reforms

Several welcome reforms were enacted in 2024 and 2025, including the removal of personal income tax exemptions and preferential tax regimes and a reduction of the scope of the special tax scheme for microenterprises. Additionally, Romania enacted an important reform of its pension system, reformed its minimum wage framework, and raised the amount of support provided under the minimum inclusion income scheme. Reforms to streamline public procurement procedures and to strengthen institutional capacity are underway, along with the implementation of a major reform of the education system.