OECD Economic Outlook, Volume 2025 Issue 2

Romania

GDP growth is projected to remain moderate in 2025 and 2026, at 1.3% and 1% respectively, before picking up to 2.2% in 2027. Private consumption is expected to remain weak until mid-2026, as slowing wage growth and fiscal consolidation measures - such as the higher VAT rate and pension freezes - weigh on real disposable incomes. Investment, with an acceleration of NGEU-funded projects, is set to drive growth, while exports gradually recover.

Monetary policy is set to remain unchanged until inflation starts slowing markedly in the second half of 2026. Further fiscal consolidation will be necessary beyond 2026 to put the public finances on a sustainable path. Efforts should focus on improving spending efficiency, raising revenue from less growth-distortive sources, strengthening tax collection, and incentivising workforce participation. Effective use of EU funds will be key to support demand and boost growth potential. Structural reforms to simplify administrative procedures, streamline licensing, and strengthen insolvency frameworks would enhance the business environment.

Recent economic developments

Growth remained subdued in the first half of 2025, and GDP contracted by 0.2% in the third quarter (quarter-on-quarter), reflecting broadly weak activity across sectors. Industrial production grew modestly by 0.4% year-on-year in September, while private consumption weakened, with retail sales contracting by 2.3% in the third quarter (quarter-on-quarter). Slower wage growth and fiscal consolidation measures, including pension and public wage freezes, weighed on real incomes, compounded by persistent inflation and renewed price pressures from the removal of energy price caps in July and increases in VAT in August. Conversely, stronger export performance and a rebound in construction have supported growth. Labour market conditions have deteriorated, with unemployment rising to 6.3% in the second quarter of 2025, from 5.3% one year earlier.

Romania

1. Maastricht definition.

Source: Eurostat; and OECD Economic Outlook 118 database.

Statlink

Romania: Demand, output and prices

Statlink

The direct impact of increased US import tariffs is moderate due to low direct exposure to the United States (2.5% of total goods exports), but Romania is impacted indirectly through reduced external demand from EU trade partners.

A tightening fiscal stance supports a still-restrictive monetary stance

The government adopted fiscal consolidation measures for 2025-2026, including a 2 percentage points increase in the VAT rate, higher excise duties, and a freeze on public wages and pensions until 2026. Taking these into account, the budget deficit is projected to narrow from 9.3% of GDP in 2024 to 8.3% in 2025, and further to 6.3% in both 2026 and 2027. Government debt is expected to rise from 63.5% of GDP in 2024 to 74.7% in 2027. The cyclically adjusted primary balance is set to improve by 2% of GDP in 2025 and 2.8% in 2026, broadly stabilising in 2027 as no further measures are planned. The National Bank of Romania is expected to keep interest rates on hold until the third quarter of 2026 due to renewed inflationary pressures following the tax increases. As inflation eases in the second half of 2026, the benchmark rate is projected to gradually decline thereafter, reaching 4% by 2027, with inflation returning within the tolerance band (2.5% ±1 percentage point) by the first quarter of 2027.

GDP growth will rise moderately in a context of fiscal consolidation

GDP growth is projected to remain moderate over the next two years, at 1.3% in 2025 and 1% in 2026, before edging up to 2.2% in 2027, still below potential. Slowing wage growth and fiscal consolidation measures – including pension freezes and tax increases that temporarily raise inflation – are expected to weigh on real incomes and dampen private consumption until mid-2026. Investment growth should gradually strengthen, initially supported by faster implementation of NGEU-funded projects and, from 2026 onwards, by a recovery in private investment as financing conditions ease and global prospects improve. Exports are set to recover gradually with improving external demand, while subdued import growth will help to narrow a still-elevated current account deficit. Year-on-year inflation is expected to remain high until mid-2026 before dropping below the upper end of the tolerance band during the first quarter of 2027, driven by base effects and weaker domestic demand. The unemployment rate is projected to rise somewhat in the near term, reaching just under 6.5% by mid-2026, before gradually improving thereafter. Delays in absorbing NGEU funds could weaken domestic demand by dampening investment, and amplifying the slowdown in growth amid fiscal consolidation.

Fiscal consolidation and reform momentum needs to continue

Further consolidation measures will be needed beyond 2026 to stabilise the public debt ratio, through improved spending efficiency, additional revenue measures, and stronger tax collection capacity. Strengthening long‑term growth also requires measures to increase labour participation, including reducing the high share of youth not in employment, education, or training (NEET) by addressing school drop‑out rates, and expanding access to affordable childcare to support women’s employment. To foster entrepreneurship, competition, and firm growth, Romania should continue simplifying administrative procedures for establishing and operating businesses through digitalisation and a more streamlined licensing framework. Improvements in the insolvency mechanisms, particularly restructuring frameworks and court procedures would further support the reallocation of resources from non-viable firms.