Allianz Trade: Romania faces economic uncertainty amid fiscal and business challenges

Romania's economic outlook remains uncertain, with high inflation, fiscal imbalances, and rising insolvencies posing major challenges, according to the Country Risk Atlas 2025 by Allianz Trade.

Despite expectations of moderate GDP growth of 3.1% in 2025, businesses continue to struggle with high borrowing costs and weak consumer demand.

"At the micro level, local companies face pressure from high credit costs and slowing domestic consumption, while exports fail to offset this decline. It is no surprise that insolvencies increased by nearly 10% last year, driven by liquidity deterioration. The most exposed sectors remain construction, particularly residential, and wholesale and retail trade, where falling profit margins, cash flow constraints, and payment delays put firms under significant strain," said Mihai Chipirliu, CFA – Risk Director, Allianz Trade.

The report highlights that Romania's public deficit remains above 6% of GDP, with high external debt and a current account deficit exceeding 7% of GDP. Inflation is expected to decline to 4.5% in 2025 but remains higher than regional peers due to rising wages and loose fiscal policies.

Political uncertainty adds to economic risks, as a potential country rating downgrade in Q2, linked to the May elections, could further increase borrowing costs.

"Despite these challenges, the situation remains manageable if fiscal deficit reduction measures are implemented and Romania benefits from a favorable agricultural year," added Chipirliu.

(Photo source: Allianz Trade)