Amid two years of severe fiscal consolidation, complicated by unexpected impacts from the Middle East crisis, Romania’s economy will post a marginal 0.1% growth in 2026, according to the European Commission’s Spring Forecast published on May 21. This marks a sharp revision from 1.1% under the Autumn Forecast last fall

The quasi-stagnation comes after two years of sluggish advance of under 1% per annum, but it looks more optimistic compared to other independent projections.

The Commission expects Romania’s economy to rebound at a 2.3% growth in 2027, as the fiscal stance – which measures the fiscal consolidation in terms of structural deficit  – will ease to 0.1% of GDP in 2027 from 2.5% of GDP in 2026 and 2.1% of GDP in 2025.

Accordingly, Romania’s general government budget deficit will shrink by 1.7 percentage points (pp) to 6.2% of GDP this year, faster compared to the 1.4pp contraction in 2025 – but the fiscal consolidation pace will ease to 0.4pp to a deficit of 5.8% of GDP in 2027.

The current account deficit is projected to gradually decrease, driven by fiscal consolidation, from 7.9% of GDP in 2025 to 6.9% in 2026 and 6.4% in 2027. 

The baseline scenario for this year remains recession, president of CFA Romania Society Adrian Codirlasu commented, cited by Ziarul Financiar, several days after Erste Bank cut its forecast for this year’s growth from +0.3% to -0.3%. Private consumption was already expected to shrink before the Middle East crisis, which further fueled inflation, digging into households’ incomes and companies’ capacity to pay higher wages or hire more. 

The Commission expects a 0.4% decline in employment this year, after a steeper 3.5% decline in 2025, while the labour market may recover only in 2027 (+0.5%). It also implied a real contraction of wages by over 2% this year, twice the 1.1% average contraction seen in 2025.

Combined with constant pensions and wages in the budgetary sector and gloomy consumer confidence, the adverse labour market conditions will severely impact the aggregated demand.

Total consumption was expected to contract by 0.8% under the Government’s Winter Forecast (December 2025) before the Middle East crisis, while the Commission’s Spring Forecast envisaged a steeper plunge of -1.9% for private consumption and -1.6% for government consumption. 

Other analysts remain more optimistic about Romania's economic growth. UniCredit, for example, recently affirmed its forecast for 1% growth in 2026. 

The European Commission expects 4.1% rise in gross fixed capital formation this year, compared to 4% envisaged by the Government in December. The Recovery and Resilience Funds (RRF) and the private investors’ confidence are expected by the European Commission to gradually recover, reinforcing the recent pick-up in foreign direct investment.

The absorption of EU funds keeps Romania’s economy on a positive path, but risks mount amid a political crisis. The excess demand generated by the abundant RRF financing of projects, around 2.5% of GDP in 2025 and possibly in 2026 (not counting the cohesion funds), has prevented a prolonged recession that would have otherwise accompanied the fiscal consolidation effort during 2025-2026. 

A rebound in real GDP growth to 2.3% is forecast in 2027, as the freeze on public wages and pensions ends and lower HICP inflation stabilises disposable income, supporting a turnaround in private (+2.8%) and public (+0.2%) consumption. Government investment is projected to decelerate following the end of the RRF, but private investment is set to take over, underpinned by improved investor sentiment and better financing conditions. 

Overall, gross fixed capital formation would still decelerate from 4.1% y/y in 2026 to 2.3% y/y in 2026. Domestic risks to growth are tilted to the downside as rising domestic political instability undermines investor confidence in the fiscal adjustment path.

iulian@romania-insider.com

(Photo source: Cineberg Ug/Dreamstime.com)