Romania most exposed CEE country to a prolonged Middle East war, Erste says
Romania is the most exposed country in Central and Eastern Europe (CEE) to the consequences of the war in the Middle East, according to a report by the Austrian banking group Erste, present in Romania through major bank BCR. Its vulnerability partly stems from its bloated public deficit and the measures taken to lower it.
In a pessimistic scenario, involving an escalation of the conflict or a prolonged blockade in the Hormuz Strait, Romania faces the risk of recession. As a result, the bank downgraded Romania’s growth forecast to 0.3%, from 1% previously.
According to the analysis, inflation remains a problem across the entire region, even though the price of oil has dropped below USD 100 per barrel following the truce in the Middle East. The average inflation in Romania, Poland, Hungary, the Czech Republic, Slovakia, Bulgaria, Croatia, and Slovenia is now forecast at 3.8%, compared to 3.2% previously, which reduces the chances of cuts in key interest rates in the near future.
Inflation in Romania climbed to 9.9% in March after five months of slow decrease, partly due to the war in Iran, although its impacts throughout the whole chain remain limited.
In this context, central banks in the region are expected to keep interest rates at current levels. Romania is the only exception, where analysts still see a possible modest cut of 0.25%, but only toward the end of the year, most likely in November.
On the economic growth side, revisions are relatively small in most countries in the region, but Romania stands out negatively. The estimate for 2026 has been significantly reduced, from 1% to just 0.3%, indicating economic stagnation.
Unlike other states, Romania’s weakness is not only linked to the external context, but also to internal factors, such as the fiscal consolidation package, which reduces consumption and investment, according to Erste.
“Romania has been the most exposed to the cyclical downturn (regardless of the war), as the fiscal consolidation package is weighing on economic activity,” Erste analysts said.
According to the report, a possible escalation of the conflict in the Middle East or persistent blockages in oil transport through the Strait of Hormuz would keep energy prices high and strongly affect economic growth. In this case, Romania would enter a recession, being the most affected economy in the region.
Although this scenario is currently considered unlikely, the report emphasizes that risks remain high, and the fragile state of the Romanian economy makes it more vulnerable than other states in the region.
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