OECD Economic Surveys: Romania 2026

Executive summary

Key messages

Romania’s income and productivity convergence with OECD levels has been impressive, despite a recent growth slowdown driven in part by fiscal consolidation. Romania continues to benefit from substantial EU funding that supports investment and long-term growth potential. While strong wage growth in recent years has supported nominal incomes, it has also contributed to inflation and weakened price competitiveness, highlighting the need for more balanced growth.

This Survey highlights four key messages:

• Past fiscal expansion has strongly widened the budget deficit, creating the risk of an unsustainable debt trajectory. Improving spending efficiency and broadening the tax base are essential to correct fiscal imbalances. Monetary policy should hold rates steady until inflation approaches target.

• Low-skilled youth, women, and older workers remain underrepresented in the formal labour market. Expanding participation calls for better education, affordable childcare, inclusive employment policies, and better health outcomes to support the integration of older workers.

• Climate change adaptation should accelerate. Priorities include improving risk disclosure, limiting residential development in high-risk areas, enhancing flood defences, improving water management and expanding insurance coverage.

• Romania has made strong progress in global integration. To support technology and knowledge spillovers, and move up the value chain, it should boost innovation, digital adoption, education outcomes, and business dynamism. Effective implementation and monitoring of anti-corruption measures also remain key to support the business environment.

Continued structural reforms are needed to sustain income convergence

Robust growth over the last two decades has narrowed the gap with OECD living standards. Sustained structural reforms and fiscal prudence are necessary to support convergence and macroeconomic stability.

Romania has achieved substantial real income convergence with OECD countries over the last two decades (Figure 1), driven by market opening, reforms to enhance product and labour markets, and an improved rule of law. The significant inflow of EU funds has supported investment and modernisation, while full Schengen integration in 2025 marked another step forward in EU integration. Monetary policy has successfully transitioned to inflation targeting, contributing to lower inflation and reduced volatility. The public debt ratio has remained relatively low until recently, while the financial sector has been significantly strengthened.

Despite notable progress, Romania continues to face persistent challenges and should sustain its reform momentum. Since the 2024 Economic Survey, key reforms include a pension reform linking retirement age to life expectancy, the removal of several tax exemptions and preferential tax regimes, progress in digital infrastructure and e-government, and the initiation of major education reforms. To consolidate these achievements, Romania should enhance strategic planning and oversight within government, reduce institutional fragmentation, improve tax compliance and legislative stability, and ensure an effective implementation of reforms. Strengthening public service delivery across regions is also critical to addressing regional disparities.

Figure 1. Income convergence with OECD countries has been strong

GDP per capita, thousand USD, volume, constant PPPs, reference year 2020

Note: OECD CEEC is a non-weighted average and covers Czechia, Hungary, Poland, Slovak Republic, and Slovenia.

Source: OECD National Accounts database.

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Economic activity has slowed, while inflation stays above target

Economic growth is constrained by the urgent need to restore fiscal balances and by more subdued external demand. EU investment flows can help support activity in the near term. Monetary policy will need to remain restrictive until inflation returns to target.

Despite strong resilience during the pandemic and the energy crisis triggered by Russia’s war of aggression against Ukraine, Romania’s economic activity has started to lose steam. It slowed over 2024 and 2025, reflecting weaker external demand and, since 2025, the dampening effects of fiscal consolidation on domestic activity. Public investment remains supported by substantial EU funding, while private investment has decelerated. Inflation has declined since the energy crisis but remains significantly above target. Strong wage growth over recent years has fuelled underlying inflation and added pressure on cost competitiveness.

The fiscal stance is posing challenges for the conduct of monetary policy. Monetary policy should maintain interest rates steady until underlying inflation shows a clear downward trend toward target. Private sector borrowing has increased, though overall private indebtedness remains low by OECD standards. Close monitoring and stricter regulation of vulnerable segments, such as euro-denominated corporate borrowing and government-backed lending, will be important to safeguard financial stability.

GDP growth is expected to remain below potential in the near term, at 1.0% in 2026, before gaining momentum in 2027. Inflation is projected to stay elevated through mid-2026, before gradually declining as the impact of fiscal measures fades. Recent wage policies, including public sector wage freezes and the absence of minimum wage adjustments, are expected to curb wage growth in the near term.

Risks to the outlook remain significant. Domestically, while fiscal consolidation may weigh on growth more than currently expected, failure to restore fiscal sustainability could undermine investor confidence and delay access to EU funding. Slow absorption of EU funds, particularly under the Recovery and Resilience Facility, may also dampen growth. By contrast, fiscal discipline, quick EU fund absorption, and complete Recovery and Resilience Plan implementation could bolster investor confidence and growth. While Romania has limited direct exposure to global trade tensions, its integration into EU value chains leaves it vulnerable to external shocks.

Table 1. Necessary fiscal consolidation is weighing on near-term growth prospects

Annual growth rates, unless specified

	2024	2025	2026	2027
Gross domestic product	0.9	0.7	1.0	2.2
Private consumption	5.7	0.6	0.6	1.2
Government consumption	1.2	-1.9	0.4	0.9
Gross fixed capital formation	-2.5	4.1	4.7	3.7
Exports	-2.5	3.9	1.1	2.5
Imports	4.0	4.8	-0.3	1.4
Unemployment rate, % of labour force	5.4	6.1	6.1	5.7
Consumer price index	5.6	7.3	6.6	3.0
General government fiscal balance, % of GDP	-9.3	-8.3	-6.3	-6.3
General government gross debt (Maastricht), % of GDP	54.8	59.2	61.5	64.9

Source: OECD Economic Outlook database.

Safeguarding fiscal sustainability is crucial

Romania’s public finances have deteriorated strongly, posing risks for the long-term sustainability of public finances. Avoiding this will require enhancing the efficiency of public expenditure, as well as broadening the tax base and improving tax compliance. Strengthening medium-term fiscal planning will also be needed to ensure fiscal discipline.

The budget deficit is elevated, at 9.3% of GDP in 2024. Public debt, while still relatively low in OECD comparison, has increased by 20 percentage points since before the pandemic, reaching 55% of GDP in 2024 and continuing on an upward trajectory. In response, Romania implemented a series of fiscal consolidation measures in 2025, aimed at correcting fiscal imbalances. While these measures mark important progress, sustained efforts over the coming years will be necessary to significantly reduce the deficit and place public debt on a firmly downward trajectory.

Romania needs to enhance spending efficiency to strengthen public finances and support growth. The recent pension reform – notably by raising the retirement age for women, limiting special pensions, and introducing new indexation rules – is a positive step toward improving the sustainability of the pension system and encouraging labour force participation. Strengthening public investment management and prioritisation and accelerating EU fund absorption also remain priorities to boost growth. At the same time, Romania faces growing pressure to increase spending on healthcare, education, social assistance, and innovation, to support inclusive growth. Public wages account for a growing share of government spending, calling for tighter control.

Revenue measures should aim at broadening the tax base and improving tax compliance. Environmental and property taxes remain underutilised and should be strengthened. The flat personal income tax and a low non-taxable allowance, along with high social security contributions creates high tax wedges for low-income earners and limits redistribution and labour supply of low-income workers. Reforms to enhance fairness and work incentives could include raising the allowance or introducing an earned income tax credit, alongside a gradual reduction in social security contributions over time. The recent lowering of the microenterprise tax threshold is a welcome step toward strengthening corporate taxation. Further digitalisation and risk-based audits of the tax administration would help improve enforcement and revenue collection.

While Romania’s formal budget framework aligns with OECD best practices, its credibility has been weakened by repeated exemptions and ad hoc spending decisions. Enhancing fiscal credibility requires consistent enforcement of national fiscal rules, supported by a stronger role for the Fiscal Council. Greater emphasis on medium-term budget planning, together with systematic performance-based budgeting and spending reviews, would strengthen accountability and improve resource allocation.

Promoting participation and healthier working lives would mitigate demographic challenges

To offset the labour force decline driven by population ageing and emigration, labour market participation of underrepresented groups should be increased. Policy efforts should focus on improving education and training for inactive youth, removing barriers for women and older workers, and promoting longer and healthier working lives.

Figure 2. Inactivity rates of young people are high

Share of 15–29-year-olds not in employment, nor in education or training (NEET), 2024 or latest

Note: OECD CEEC is a non-weighted average of Czechia, Hungary, Poland, Slovak Republic, and Slovenia.

Source: OECD Education at a Glance database.

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Romania’s labour force is shrinking due to rapid population ageing and sustained emigration. The old-age dependency ratio is set to further rise by 20 percentage points by 2050, placing increasing pressure on the labour market, pension systems, and public finances. At the same time, several groups are underrepresented in the formal labour market, including low-skilled youth, women, and older individuals.

Youth inactivity is higher than in most OECD countries (Figure 2), reflecting also a stark urban-rural divide. Addressing this challenge calls for comprehensive improvements across the education system, from expanding access to quality early childhood and secondary education to strengthening vocational training and the transition to the workforce. Targeted financial support for vulnerable families and more effective active labour market policies will also be necessary.

Low female labour force participation reflects gender barriers to employment – including cultural norms – and unequal caregiving roles. Expanding formal childcare and gradually reducing generous parental leave could encourage mothers to return to work. Targeted active labour market policies and stronger workplace anti-discrimination measures can also help boost female labour force participation.

Older worker participation needs improvement, including through better health outcomes. Pension reform, combined with lifelong learning and flexible work arrangements, would help support their labour market participation. Promoting healthier ageing is also key to support participation. Strengthening prevention, primary care, and early detection is essential to improving overall health outcomes. Promoting healthier lifestyles and strengthening incentives to reduce risky behaviours, such as through tighter regulation of the sale and marketing of unhealthy foods, tobacco, and alcohol, would help ease pressure on the healthcare system. Expanding general practitioners’ preventive roles and care coordination, alongside improving access to quality healthcare for vulnerable populations, is key to more efficient service delivery.

Managing rising third-country immigration more effectively calls for reforming the quota system and labour market tests. Stronger efforts are also needed to support the labour market integration of returning Romanian migrants, including through a dedicated integrated portal.

Strong exposure to climate change calls for enhancing resilience

Climate-change is exerting growing pressure on economic activity and social well-being. Accelerating adaptation measures – such as improved flood defence maintenance, expanded disaster insurance coverage, and enhanced water management – is essential to safeguard vulnerable populations and protect critical infrastructures.

Figure 3. Romania is strongly exposed to global warming and extreme weather events from climate change

Change in the annual mean surface air temperature over land in 2024 compared to the baseline period 1981-2010

Source: OECD-IEA Historical exposure to extreme temperature dataset.

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Romania is highly exposed to global warming and extreme weather events, particularly heatwaves, droughts and river flooding (Figure 3). These pose significant human and economic risks: climate-related economic costs amounted to 6% of GDP between 1980 and 2023. The scale of future damage will depend on the government’s capacity to anticipate and respond to climate impacts. While Romania’s National Strategy for Adaptation to Climate Change 2024-2030 provides a solid policy framework, substantial implementation gaps remain, calling for more decisive policy action in areas such as flood protection, water management and agricultural adaptation.

Romania has made progress in flood management in line with the EU Floods Directive, but many defence systems remain in poor condition. A national maintenance plan could help prioritise measures, clarify costs and implementation steps, and promote cost-effective, flexible nature-based solutions. Strengthening multilevel governance in land-use planning is essential to prevent construction in flood-prone areas, requiring stricter enforcement of regulations and clear bans on development in high-risk zones. For existing properties, mandatory disclosure of flood risk in transactions and stronger incentives for resilience upgrades are needed. Increasing the uptake of mandatory disaster risk insurance is also critical.

Romania is already facing localised water scarcity, a challenge likely to intensify with climate change. Water losses from aging infrastructure and inefficient irrigation are compounded by low wastewater treatment and limited water reuse. Romania should modernise water infrastructure, upgrade treatment systems, and promote water reuse, while addressing inefficiencies in water use. Climate-smart farming practices can ease pressure on the agricultural sector. In housing, better targeting incentives for climate-resilient renovations should be paired with a more effective governance framework for renovation programmes. Overall, delivering on these priorities will require sustained commitment, cross-sectoral coordination, and stable long-term financing.

Additional climate mitigation efforts in synergy with adaptation measures are needed to meet agreed emission reduction targets. Key priorities include strengthening carbon pricing, expanding low-carbon electricity generation while phasing out fossil fuels, greening transport through higher fuel and vehicle taxes, and improving energy efficiency in urban mobility and buildings.

Strengthening competitiveness to increase benefits from global integration and move up the value chain

Romania has made significant strides in global market integration over recent decades. To sustain this momentum, it must tackle persistent structural challenges – particularly in innovation, digitalisation, education, and business dynamism – that continue to constrain productivity and limit its economic potential.

Figure 4. Driving continued progress in the business environment

Economy-wide PMR, index scale 0-6 from least to most restrictive

Note: OECD and OECD CEEC are non-weighted averages. OECD CEEC covers Czechia, Hungary, Poland, Slovak Republic, and Slovenia.

Source: OECD-WG Product Market Regulation database

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Romania has deepened its integration into global markets, yielding substantial productivity gains, facilitating technology transfers, and expanding market access. Foreign direct investment has been a key driver of this process. Nonetheless, there remains significant potential to strengthen linkages with foreign investors and to enhance the domestic value-added content of trade by improving the economy’s absorptive capacity. Persistently low levels of innovation and educational attainment, coupled with remaining infrastructure deficits, continue to constrain Romania’s economic competitiveness.

While digital infrastructure is strong and continues to improve, the use of digital technologies and innovation capacity are held back by limited digital skills and insufficient managerial capabilities. Improving the efficiency and accessibility of existing R&D tax incentives, alongside the provision of user-friendly digital information and funding mechanisms, as well as continuous digital upskilling, could significantly strengthen firms’ ability to benefit from digital transformation. Limited access to finance calls for further promoting training and mentorship programmes to strengthen SMEs’ financial literacy and reporting practices.

The shift toward higher value-added activities will require equipping the workforce with advanced skills. Implementing the ongoing education reform is key to raise attainment, reduce dropout rates, and improve learning outcomes. This should be supported by the delivery of planned funding increases and improved strategic planning within government to better target resources and ensure effective monitoring of reform progress. Improving the quality and relevance of vocational education will require enhanced curricula, labour market-oriented programmes, and clearer pathways to higher education. Efforts should also be made to render access to tertiary education more inclusive. Broader participation in adult learning would help promote lifelong skill development.

Romania has made significant progress in streamlining and digitalising business registration and remains highly open in network industries as well as in the trade and investment environment. Nonetheless, further efforts are needed to simplify and digitalise the business licensing framework to further lower the administrative burden on businesses (Figure 4). The high share of non-viable but still operating firms also highlights the need to improve the insolvency framework, particularly with respect to restructuring mechanisms and court procedures. Strengthening the efficiency and accessibility of public procurement also remains a key priority. Romania has made progress on ambitious integrity reforms, including recently strengthening its frameworks for lobbying and pre- and post-public employment. Effective implementation and monitoring will be key to sustain these reforms.

Romania has set out ambitious plans to close existing transport infrastructure gaps. High absorption of EU funds will be essential to boosting investment, alongside improved road maintenance. Stable revenue should be secured through the implementation of the planned toll system for heavy goods vehicles (TollRo) and the development of additional road use charges for passenger vehicles. Shifting more freight from road to rail, supported by rail network modernisation, would also be beneficial. In addition, infrastructure governance should be strengthened through streamlined administrative procedures and enhanced local capacity.

 

MAIN FINDINGS	KEY RECOMMENDATIONS
Macroeconomic developments & policy
After the fiscal deficit widened to 9.3% of GDP in 2024, the government has adopted several important consolidation packages. However, with no measures specified after 2026, long-term fiscal sustainability is at risk.	Beyond the full implementation of recently adopted consolidation measures, continue spending restraint and broaden tax bases over the medium-term to achieve fiscal commitments.
Headline and core inflation remain well above the tolerance band of the 2.5% ±1 percentage point target.	Resume policy rate cuts only once inflation is on a clear downward path toward the inflation target.
Government-backed corporate loans exhibit higher levels of impairment.	Gradually phase out broad-based public loan guarantee schemes.
The use of spending reviews in budgetary processes is still at an early stage.	Strengthen performance-based budgeting and spending reviews, and integrate them systematically into the budget process.
The public-sector wage bill represents a large share of spending and ad hoc pay increases undermine fiscal sustainability while weakening links between pay and performance.	Strengthen control of the public wage bill, notably by adopting a transparent and fiscally prudent formula for wage increases.
Low tax compliance and widespread informality limit revenue collection, with a high VAT compliance gap. Income under-reporting is common among lower income groups.	Strengthen tax collection by digitalising and modernising the tax administration, enhancing risk-based tax management tools, and building staff capacity to carry risk-based audits.
Property taxes, which are among the least detrimental to economic growth, are low compared with OECD countries.	Gradually increase revenue from recurrent taxes on immovable property by basing taxation on market value and raising tax rates.
Promoting higher workforce participation and healthier working lives
Many unemployed are not registered with public employment services, raising risks of long-term labour market detachment. ALMPs are underfunded, with scarce and poorly targeted training.	Step up efforts to strengthen outreach by public employment services to inactive individuals while expanding access to high-quality, labour market–relevant training.
Low enrolment rates in childcare and early childhood education, particularly in rural areas, stems from gaps in service provision.	Expand affordable childcare and early childhood education, and as availability improves, gradually reduce duration of leave entitlements.
Mortality rates from preventable causes are high. Nearly half of all deaths in Romania are linked to behavioural risk factors, highlighting the insufficient focus on prevention.	Promote healthier behaviours by tightening regulations on the sale and marketing of unhealthy food, tobacco and alcohol and considering higher taxes on tobacco and alcohol.
Labour market integration of returnees is hindered by weak and scattered labour market integration services and complex procedures for recognising foreign qualifications and experience.	Create an online platform centralising integration services to support returnees’ resettlement, job search, and recognition of foreign credentials.
Enhancing resilience to climate risks
An increasing number of properties and infrastructure are exposed to climate-related risks. Land-use planning practices often fall short of systematically incorporating climate risk considerations.	Strengthen the enforcement of flood and other climate-risk related regulations in land-use planning, including the explicit prohibition of construction in high-risk zones.
Although disaster insurance is mandatory for households, coverage and enforcement are low.	Increase uptake of mandatory disaster insurance for households by raising awareness, clarifying obligations, and enforcing compliance.
Low wastewater treatment, limited water reuse policies, and high losses from ageing water systems are straining freshwater resources.	Improve wastewater treatment and ensure full compliance with EU regulations, fully leveraging EU and domestic funding.
Romania’s housing stock faces significant climate risks and suffers from low resilience and energy efficiency, due to poor thermal insulation and inefficient heating and cooling.	Establish a more effective management framework for housing renovation programmes, including improved coordination across levels of governance, and fully leverage available EU funding.
Strengthening Romania’s competitiveness
Weak business R&D constrains local SMEs from innovating and creating value.	Enhance access to information on public R&D tax incentives and grants, and consider making R&D tax credits refundable for SMEs.
Bank-based financial intermediation and capital markets remain underdeveloped, while alternative non-bank financial instruments are limited, constraining both access to and demand for financing.	Strengthen SMEs’ financial literacy and financial reporting through targeted training and mentorship programmes.
Dropout rates in vocational education (VET) are very high. The system offers limited pathways into other education tracks.	Strengthen systematic collaboration with industry bodies in the design and delivery of dual VET programs. Improve pathways from VET to higher education.
Despite progress, business licencing remains cumbersome, with timelines that are unclear and lengthy.	Establish clear procedures and timelines for business licensing and enhance transparency and online access to all licensing requirements.
Public procurement has a solid legal basis but is impeded by limited access, lack of standardisation, and frequent legal changes.	Improve predictability, clarity, and standardisation in procurement.
Significant gaps in transport infrastructure persist. Poor project planning and execution lead to delays and cost overruns.	Streamline administrative procedures and local capacity to plan and implement infrastructure projects.
Romania has made progress on ambitious integrity reforms, including recently strengthening its frameworks for lobbying and pre- and post-public employment. Effective implementation of integrity measures remains a challenge.	Strengthen capacity of institutions and officials with integrity roles to support effective implementation, including of the newly reformed lobbying and pre- and post-public employment frameworks.