RoEM report predicts 0.5% economic contraction in Romania this year, driven by political crisis

Experts of Babes Bolyai University in Cluj-Napoca, compiling the Romanian Economic Monitor (RoEM), forecasted economic contraction of 0.5% this year amid political instability, a sharp revision from the 0.2% growth projected after the chronicisation of the Middle East war and a more optimistic 0.8% growth set at the beginning of the year.

The economy will return to growth with a robust 2.2% advance in 2027, driven by the positive effects of fiscal consolidation and lower inflation, according to the RoEM-UBB forecast.

The main element seen as dragging down the economic growth this year, as well as restoring growth in 2027, is private consumption.

"Given the global context and the internal political instability in Romania, our new forecast indicates a GDP decline of 0.5%, which would correspond to a moderate economic recession for the entire year 2026,” the report reads.

However, despite this scenario, analysts still see reasons for moderate optimism. In the longer term, there is potential for stabilising the economy, the analysts argue: tempering inflation could lead to a recovery in purchasing power and domestic consumption, the effects of fiscal measures could gradually fade, and the business environment could adapt to the new economic realities.

The analysts expect that Romania will continue its fiscal consolidation process, with the result of stronger investor confidence and better public debt financing conditions.

These developments could create favourable premises for the relaunch of economic growth, under the RoEM forecast.

“In this context, our estimate for 2027 remains positive, with the forecast indicating a growth in Romania's GDP of 2.2%," concluded Levente Szász, the coordinator of the RoEM-UBB team.

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