Romania's economy is expected to rebound at a slower rate than previously expected at around 1.8% this year (down from 2.6% y/y projected in September), given the pressure to cut government deficits in an increasingly challenging domestic and external economic environment, according to the Regional Economic Prospects 2025 report issued by the European Bank for Reconstruction and Development (EBRD).

This would mark a gradual recovery after the modest 0.7% performance in 2024.

However, even this fragile improvement hinges on political normalization after the May presidential elections and the implementation of reforms under the EU's Resilience Facility.

The government hopes for 2.5% economic growth this year, driven by investments fueled by better absorption of Resilience Facility funds. However, the political turmoil and delayed investment decisions in the private sector may have a negative impact even if the situation normalizes after the May presidential elections and no major fiscal corrective measures are enforced this year in addition to the first budgetary corrective package passed last December.

The EBRD expects Romania's growth to return towards its potential level, at 2.4% in 2026. However, this depends on the renewed structural reform efforts to unlock EU funds disbursement and foreign demand recovery, the bank warns.

Fiscal and monetary policies are likely to restrain economic growth in 2025.

With the approval of a seven-year fiscal consolidation plan, the government targets a deficit of 7% of GDP this year. Separately, the monetary policy remains tight given the still elevated inflation and uncertainty, which weighed on the cost of financing.

iulian@romania-insider.com

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