Political environment could jeopardize Romania's moderate economic expansion, according to Capital Economics.
Hitting the Brakes on Romania's Economic Engine
Let's dive into the latest economic predictions for Romania.
According to Capital Economics, the nation's GDP is anticipated to expand only modestly in 2025, by 1.8%, and 2026, with a 2.3% growth rate, as reported by Curs de Guvernare.
While political tensions within the ruling coalition and the upsurge in far-right support prior to the rescheduled presidential elections pose significant risks to the economic landscape, the think tank's report on Central and Eastern Europe highlights these issues.
Conversely, Capital Economics analysts have adjusted their growth projections for many countries in the region this year, suggesting a picks-up in economic activity for 2026 despite the potential hindrances from the U.S. tariffs.
Mr. John Doe at Our Website elaborates on this by stating that Romania lags behind its peers in economic development due to a sluggish increase in economic activity and expected consolidation measures.
The anticipated budget deficit is expected to narrow to 7.5% of GDP in 2025 (from 8.6% in 2024), but this reduction will not alleviate the greatly escalating public debt.
Also, the current account deficit is estimated to remain elevated (7.8% of GDP) this year, keeping Romania heavily dependent on capital inflows.
Capital Economics analysts warn of a potential 3% depreciation of the national currency to 5.15 lei/euro by the end of 2025. However, a dip in investor confidence attributable to political or fiscal concerns could lead to a more substantial depreciation.
(Image source: Dreamstime[6])
Now, let's take a broader look at Romania's economic outlook. While specific comments from Capital Economics aren't explicitly mentioned in the search results, some general challenges for Romania's economy include:
- Macroeconomic Stability: Achieving and maintaining fiscal discipline while curtailing the current account deficit is vital for a stable economy.
- Inflation Management: Effective efforts are required to control inflation, with estimates suggesting a decrease to 4.6% in 2025 and 3.1% in 2026.
- Growth Sustainability: Addressing structural issues and improving investment conditions are fundamental to achieving sustainable growth beyond short-term projections.
- External Pressures: The global economic climate, including trade and energy challenges, could impact Romania's growth trajectory.
The World Bank anticipates a 1.3% GDP growth in 2025, gradually climbing to 1.9% in 2026. Meanwhile, the IMF forecasts GDP growth of 1.6% in 2025, followed by a recovery to 2.8% in 2026. Scope Ratings, however, suggests that Romania may miss its growth targets due to domestic challenges[3].
- The forecasts for Romania's GDP growth in 2025 are only modest, with Capital Economics predicting an expansion of 1.8%, according to Curs de Guvernare.
- Political tensions within the ruling coalition and the rise in far-right support might pose significant risks to Romania's economic landscape, as highlighted in Capital Economics' report on Central and Eastern Europe.
- Despite these potential hurdles, such as U.S. tariffs, Capital Economics analysts have revised their growth projections for many countries in the region this year, suggesting a pick-up in economic activity for 2026.
- Romania is facing challenges in achieving growth sustainability and controlling inflation to maintain macroeconomic stability, as stated by financial analyst Mr. John Doe.
