OECD Economic Outlook, Volume 2026 Issue 1

Romania

GDP is projected to contract by 0.1% in 2026 following the output contractions in the last quarter of 2025 and the first quarter of 2026, before rising to 2.5% in 2027. Private consumption will remain weak until mid-2026, as slower wage growth, persistent inflation and fiscal tightening continue to erode real disposable incomes. Investment will be the main growth contributor, supported by EU funds, while exports will gradually improve. Key risks include delays in NGEU absorption, weakening fiscal consolidation and higher inflation from energy and wage pressures.

The monetary policy rate is expected to be stable until inflation is on a clear downward path towards target. Further fiscal consolidation beyond 2026 is essential to ensure debt sustainability, focusing on stronger tax collection and more efficient spending. Effective use of EU funds is key to support growth, while energy price support should be better targeted and phased out as conditions allow. Simplified administrative procedures, strengthened insolvency frameworks and reforms to improve labour force participation would enhance growth prospects.

Growth has remained weak in 2025 amid fiscal consolidation

GDP growth remained weak in 2025, contracting significantly in the final quarter of the year and again, though more moderately, in the first quarter of 2026, amid fiscal consolidation, elevated inflation and subdued external demand. Industrial output fell by 2.2% year-on-year in March 2026, notably reflecting weakness in the auto sector. Public investment, underpinned by EU funds, supported activity. Private consumption, which declined in the second half of 2025 as slowing wage growth and fiscal tightening squeezed real incomes, remained weak in the first months of 2026, with retail sales down 3.2% year-on-year in March. Headline inflation rose to 10.7% in April due to higher energy prices, after renewed pressures in summer 2025 following the removal of electricity price caps and a VAT increase. Unemployment has edged up slightly but remains resilient, standing at 6.1% in March 2026.

The evolving conflict in the Middle East has pushed up domestic energy prices, adding to inflationary pressures and exposing oil-reliant sectors such as transport and agriculture. The government introduced temporary measures to safeguard supply and limit fuel price increases, including export controls, limits on markups, diesel excise cuts, and support for transporters, while extending electricity price caps for households.

Romania

1. Maastricht definition.

Source: Eurostat; and OECD Economic Outlook 119 database.

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Romania: Demand, output and prices

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Monetary policy is expected to stay restrictive, while the fiscal stance is tightening

Fiscal consolidation measures for 2025-2026 – including higher VAT, a freeze on public wages and pensions – helped reduce the budget deficit to 7.9% of GDP in 2025 and are projected to bring it down to 6.2% in 2026-2027, implying an annual improvement in the cyclically adjusted primary balance of 2.6% of GDP in 2025 and 2.9% in 2026, and a neutral stance in 2027. Government debt is expected to rise from 69.8% to 75.0% of GDP between 2025 and 2027. The fiscal cost of new energy support remains contained, with diesel excise cuts and support to transporters partly offset by a windfall tax on oil activities. The monetary policy stance is expected to remain unchanged until inflation begins to converge towards target in early 2027. The key policy rate is projected to decline from 6.5% currently to 5% by end-2027, with inflation returning to the target band (2.5% ±1 percentage point) from the third quarter of 2027.

GDP growth will gradually pick up in a challenging external environment

GDP is projected to contract by 0.1% in 2026, as a gradual recovery over the year is offset by carry-over effects from the two quarters of output declines in late 2025 and early 2026. Growth is expected to strengthen to 2.5% in 2027, close to potential growth. Private consumption is expected to remain weak until mid-2026, as fiscal consolidation, slower wage growth and elevated inflation weigh on real incomes and demand. Investment will be the main growth driver, supported by faster EU fund absorption and, from 2027, a gradual recovery in private investment as global prospects improve and financing conditions ease. Exports are set to recover gradually with improving external demand, while subdued import growth will help narrow a still-large current account deficit. Inflation has been pushed up due to renewed energy price pressures, but is projected to decline markedly from mid-2026, driven by base effects and falling energy prices. Unemployment is projected to remain around 6% in the near-term, before easing in 2027. Risks include delays in NGEU absorption, which could weigh on investment and growth, as well as insufficient fiscal consolidation and excessive wage growth, which could sustain inflation through second-round effects and widen external imbalances.

Public finance consolidation and structural reform momentum needs to continue

Macroeconomic stability requires sustained fiscal consolidation beyond 2026 to stabilise public debt and reduce external imbalances. More efficient public spending, stronger tax collection, and a broader tax base would help improve the fiscal position. Some energy support measures distort prices and are poorly targeted; they should be better designed and phased out as conditions allow. Higher labour participation among the low-skilled youth and women would support fiscal sustainability and growth, calling for improvements in education, childcare, inclusive employment policies, and health. Further productivity gains depend on stronger innovation, digital uptake, education, and a more dynamic business sector. Simplified administrative and licensing procedures and more effective insolvency frameworks would support the reallocation of resources toward more productive activities. Expanding renewable supply and strengthening infrastructure and EU market integration would improve energy security.