The slowdown is a direct consequence of the fiscal consolidation packages adopted by the parliament, which include significant tax revenue increases, a nominal freeze on public wages and pensions for 2025 and 2026, and a drop in public consumption. This contractionary fiscal stance is expected to reduce disposable income and even lead to a small contraction in private consumption in 2026.

Despite this subdued outlook, the economy will continue to grow, supported by a gradual recovery in private investment, acceleration of RRF-funded spending, and a sizeable improvement in net exports. Gross fixed capital formation is expected to accelerate notably in 2026, driven by improved business confidence and the completion of RRP investments. The decline in import-heavy private consumption, combined with resilient exports, is also set to gradually reduce the large external deficit.

The general government deficit, which peaked at 9.3% of GDP in 2024, is projected to decline significantly to 8.4% of GDP in 2025 and further to 6.2% of GDP in 2026, as a result of these fiscal adjustment packages. The fiscal stance is expected to be contractionary in 2025 and 2026 before turning neutral in 2027.

However, the forecast also points to an acceleration of inflation. Average HICP inflation is projected to increase to 6.7% in 2025 and then decline to below 6% in 2026. This acceleration is linked to the elimination of the cap on electricity prices for households, along with rises in VAT and excises, which pushed HICP inflation to 8.6% in September. 

In 2027, real GDP growth is set to accelerate above 2%—forecasted at 2.1%—as the pace of fiscal consolidation eases, inflation declines, and monetary policy is expected to ease, providing support to a pick-up in private investment and consumption. Even with the end of the Recovery and Resilience Facility (RRF), gross fixed capital formation is expected to hold up well, with Romania leveraging a larger use of cohesion funds.

The labour market is set to cool down, with employment starting to decline in 2025 due to softer economic activity, leading to an unemployment rate slightly above 6%. Nevertheless, the inflow of foreign workers continued in sectors like construction and services, indicating robust demand in certain areas. The unemployment rate is projected to decline gradually to 5.6% over 2026 and 2027.

Risks to the forecast are tilted to the downside. A large deviation from the fiscal consolidation path could erode confidence and macroeconomic stability. Challenges also remain regarding the full implementation of all RRF investments and uncertainty surrounding international trade.