Romania's economy will grow by 1.67% this year while moving towards a more sustainable growth model: a smaller external deficit, higher reliance on investments amid stabilising consumption, and industrial stabilisation, according to a forecast issued by Banca Transilvania, the country's largest financial group, consulted by Cursdeguvernare.ro.

Resilience Facility funds, improved external conditions, and internal factors such as reduced domestic cost pressures, a resilient IT services sector, and a gradual recovery of real incomes are the growth drivers expected to put the economy on a more sustainable upward trajectory.

"In essence, 2026 is estimated to be the year in which Romania's investment-based growth model will become more visible, with the potential to improve both medium-term productivity and economic resilience," explained Ioan Nistor, chief economist at Banca Transilvania, in the report sent to investors.

The fiscal projection envisages 6.5% of GDP public deficit this year – but the forecast apparently preceded the better-than-expected 2025 budget execution data, so possibly the projection might be subject to a downward revision. The government informally pledged to a 6.2%-of-GDP this year, formed by a 6% gap plus some fiscal space for an economic relaunch package.

Banca Transilvania expects a stable depreciation of the domestic currency with the leu ending 2026 around the level of 5.17 to the euro, compared to 5.10 at the end of 2025 – which would imply further strengthening of local currency in real terms.

Risks for a sharper depreciation include political uncertainties, persistent inflation or fiscal slippage, while a massive influx of EU funds or better external sector performance could support the currency.

Inflation is projected to decline significantly, ending 2026 at 4.3% (versus the central bank's 3.7% y/y projection), compared to almost 10% at the end of 2025. A key role is played by "the moderate stabilisation of consumption, due to the decline in inflation and the gradual recovery of real incomes."

In monetary policy, the National Bank of Romania (BNR) is expected to maintain its restrictive stance, with "the first rate cut most likely only in the second half of the year, once there is clear and sustainable evidence that inflation is firmly on a downward path." The monetary policy rate is forecast to decrease "gradually to 5.75% by the end of 2026" from 6.50%.

iulian@romania-insider.com

(Photo source: Bancatransilva.ro)