OECD Economic Outlook, Volume 2025 Issue 1

Romania

After slowing in 2024, GDP growth is projected to increase to 1.5% in 2025 and 2.4% in 2026. Private consumption is set to remain a key driver of growth, supported by higher wages and pensions. Following a decline in 2024, investment is projected to expand gradually, supported by EU-funded infrastructure projects. Export dynamics are expected to remain weak in early 2025 and to recover gradually thereafter.

The monetary policy stance is expected to remain restrictive to ensure a convergence of inflation to target. Faster budget consolidation is necessary for the sustainability of the public finances and to narrow the large external deficit. Raising revenues from less distortive taxes would free up fiscal space for new spending on social protection, health, education, and infrastructure. Improving the absorption of EU funds would boost growth potential through key investments.

GDP growth slowed in 2024

GDP growth slowed to 0.8% in 2024, held back by stagnating manufacturing output, and contracting activity in construction and agriculture. On the expenditure side, private consumption was the main driver of growth, supported by public wage and pension increases. Higher incomes boosted imports, whereas exports declined, affected by weak external demand. Gross fixed capital formation also contracted. High wage growth has kept pressure on consumer prices and resulted in strong increases in unit labour costs, posing risks to cost competitiveness. Inflation remains above target, at 4.9% in April 2025. Despite the economic slowdown, the unemployment rate has remained broadly stable. According to the flash estimate, GDP grew by 0.5% over the year to the first quarter of 2025. High-frequency indicators in early 2025 present mixed signals. After improving in February and in March, business sentiment decreased in April. Industrial output declined by 7.7% year-on-year in March, driven by a sharp contraction in the automotive sector.

Romania

1. Maastricht definition.

Source: Eurostat; and OECD Economic Outlook 117 database.

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Romania: Demand, output and prices

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While Romania is subject to tariffs on goods in the United States, only 2.5% of Romanian exports of goods are directly exposed to the US market. However, higher US tariffs are expected also to indirectly weigh on Romania’s exports through reduced external demand from its key EU trade partners.

Monetary policy is set to remain tight and fiscal consolidation limited

The monetary stance is set to remain restrictive, with some easing projected from the third quarter of 2025 The benchmark rate is expected to decline to below 5% by the end of 2026 as inflation converges to target. The budget deficit is forecast to remain elevated over the projection, following fiscal slippage in 2024 caused by higher spending on pensions and public wages, which saw the budget deficit reach 9.3% of GDP compared to an initial target of 5%. As of 2025, a recent package of fiscal measures is intended to reduce the budget deficit by containing the growth of public wages and pensions. The budget deficit is projected to stay at 9.3% in 2025 and 2026, despite a fiscal consolidation of the underlying primary balance of 1.4% of GDP over 2025-26.

GDP will gradually recover amid external headwinds

GDP growth is projected to strengthen from 0.8% in 2024 to 1.5% in 2025 and 2.4% in 2026. Private consumption is set to remain robust. Investment growth is projected to gradually increase from 2025 onwards, supported by the assumed acceleration in the execution of EU-funded investment projects and by a progressive recovery in private investment. Following a contraction in 2024 and weak growth in early 2025, exports are expected to gradually pick up by the end of 2025. Labour market performance is expected to remain strong, with the unemployment rate projected to be 5.5% in 2026. Consumer price inflation is expected to return to the target band, reaching 3.5% in the first quarter of 2026. A lack of fiscal consolidation or persisting wage pressures could keep inflation elevated for longer and increase Romania’s external vulnerabilities.

Stronger absorption of EU funds is critical to boost investment and raise potential output

Improving the absorption of EU funds, including under the Recovery and Resilience Fund, can play a direct role in raising Romania’s economic potential, while helping catalyse additional private investment and limiting pressures on public finances. Strengthening government revenues is necessary to ensure sustainable public finances and to address emerging spending pressures. Additionally, tax reforms should focus on eliminating distortions and loopholes in the system and strengthening tax enforcement, while broadening the value-added tax base. Increasing labour force participation would help address the challenges related to a shrinking working age population. This will require policies to incentivise women to work and to improve education completion rates, particularly in rural areas. Ongoing governance reforms would complement efforts to reduce firms’ compliance costs with regulations. Transitioning from fossil fuels will require accelerating renewable energy deployment and upgrading power grids.