The Fund has cut its 2026 GDP growth forecast for Romania to 0.7% — down from 1.4% in previous projections. That is not a minor revision. Combined with the Q4 2025 contraction of 1.9% quarter-on-quarter, it places Romania on the edge of a technical recession, the kind that shows up in textbooks as two consecutive quarters of negative growth and shows up in real life as frozen investments, rising unemployment, and a government scrambling for explanations.

Inflation Gets Worse

While the growth story gets worse, the inflation story does not get better. The IMF revised Romania’s 2026 inflation upward to 7.8%, before an expected drop to 3.9% in 2027. The drivers are not mysterious — the removal of energy price caps and VAT hikes is feeding directly into household costs. Romanians who spent the past two years being partially shielded from energy prices by government intervention are now getting the bill, with interest.

Unemployment edges up to 6.0% in 2026 before easing slightly to 5.9% in 2027. The current account deficit narrows to 6.8% of GDP — still a number that makes foreign investors nervous about sustainability.

The Deficit Is the Real Problem

Behind all the growth and inflation numbers sits a fiscal hole that the IMF is clearly losing patience with. Romania’s deficit reached 8.7% of GDP in 2024 — one of the worst in the European Union by a significant margin. The Fund is now explicitly warning of downside risks from incomplete fiscal consolidation, which in diplomatic IMF language means: the cuts and tax reforms promised have not happened fast enough, and the consequences are arriving.

The sovereign rating downgrade risk is real. Romania’s public finances have been under scrutiny long enough that another year of missed targets could prompt ratings agencies to act, raising borrowing costs at the worst possible moment.

External pressures compound the picture. Slower EU growth and trade barriers are already weighing on Romanian exports and foreign direct investment, removing the external cushion that helped absorb domestic policy failures in better years.

The Politics Are Catching Up

None of this is happening in a vacuum. Government Secretary-General Ștefan Radu Oprea has publicly criticised Premier Ilie Bolojan’s economic policies for the downturn, and PSD — the Social Democrats propping up the coalition — are making noises about exiting the government. The deadline framing is explicit: calls for urgent economic relaunch measures by April 20 give the coalition roughly a week to show it has a plan.

The IMF’s prescription is familiar and politically painful — structural reforms in labour markets, rationalised public spending, and a credible investment framework for medium-term recovery. These are not things that happen in a week or even a quarter. They require political consensus that Romania’s current coalition, visibly fracturing under fiscal pressure, has yet to demonstrate it can maintain.

The numbers are out. What happens next is a political choice.

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Also, the IMF predicts that Romania’s economy will grow by 3.4% in 2023, according to the April 2022 edition (WEO) of the World Economic Outlook report. Not surprisingly, the latest report is called War sets back global recovery.

The current account deficit of Romania is expected to fall to 7% of its GDP by 2022 from 7.1% in 2021. According to the report, the current account gap will shrink to 6.5% in 2023.

The IMF predicts that consumer price inflation in Romania will rise to 9.3% by 2022, predictions confirmed by the current tendency also mentioned by Romania’s National Bank. The IMF predicts that inflation will slow to 4% in 2023.

The unemployment rate in Romania is expected to rise to 5.6% by 2022 from 5.3% in 2021. The unemployment rate in 2023 is likely to fall to 5.5%. Still, this year will be a tough one for companies and employees.

The IMF also stated that it expected the GDP of Emerging and Developing Europe, including Romania, Russia, Turkey, Ukraine, Hungary and Belarus, Bulgaria, and Serbia, to shrink by 2.9% in 2022 and rebound to 1.3% next year.

The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution. At the same time, economic damage from the conflict will contribute to a significant slowdown in global growth in 2022 and add to inflation. Fuel and food prices have increased rapidly, hitting vulnerable populations in low-income countries hardest.

IMF’s World Economic Outlook report in April

The IMF’s estimates are less optimistic than those of the Romanian government, which sees economic growth of 4.3% in 2022. But the reality slashes down even the most pessimistic expectations now, and the former Romanian PM Florin Citu even mentioned a zero growth this year.

According to opinion polls, 77% of Romanians expect an economic downturn this year. That doesn’t mean they’re ready for what’s coming, though, and Romanians are not used to saving. That means lots of them, especially those losing jobs or having their salaries diminished, will find it challenging to pay bank loans or rents.

Either way, Romanian politicians say that a big crisis is coming. The important thing is to actually do something to prevent the consequences and help those in need, including the entrepreneurs struggling to keep jobs.

The unemployment benefit in Romania is less than 100 USD a month and is offered for a maximum of 12 months.

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At the same time, the IMF warns that this growth is obtained based on domestic demand, which is a liability in itself. On one hand, the growth based on domestic demand is clearly not a sustainable one. On the other hand, an increase in domestic demand fuels inflation in the short term. That adds up to the existing 5% inflation in Romania.

The National Bank of Romania also warned the Government about the growing inflation figure and also mentioned that the economic growth the Government is boasting is based exclusively on domestic demand. The NBR’s economists expect inflation to grow even more in Romania in these conditions.

Funny enough, in a logic-defying interview, the Romanian Minister of Finance questioned the inflation rate and said it is not 5%, though all the official figures lead to this conclusion. The same minister, named recently as the head of Romanian Finance, proved not to know the minimum wage in Romania, while Prime Minister Florin Citu mentioned he didn’t know the price of a piece of bread as he mentioned he tried not to eat this kind of product.

In this context, with galloping inflation and with gas and energy prices skyrocketing in Romania, chances are the economic growth to get unnoticed by the citizens. And, if the economic growth is not making the citizens live a better life, all this is mere statistics.

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Interesting enough, this prediction places Romania on the second position in the European Union, after Spain, which is seen with a growth of 6.4% in 2021. On the following positions by growth prediction stands France, with 5.8% and United Kingdom with 5.3%.

For 2022, the IMF foresees a growth of 4.8% for Romania. Moreover, for 2021 and 2022, IMF sees an unemployment rate going down from 5% to 4.9%.

One could view this estimations as optimistic, as the Romanian Government and the World Bank projected a 4.3% growth in 2021. World Bank offered the estimation in late March, when it also predicted a 4.1% economic growth in 2022.

Notably, both IMF and World Bank improved their initial projections, offered months before, in October 2020 and January this year respectively. This means that Romanian economy proves to be stronger than some expected, despite the crisis which causes a fall of the GDP of 3.9%.

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“No country will escape unscathed. It will be the worst recession ever.”

Gita Gopinath, chief economist of the IMF

Given that the limitations imposed on the economy and public life will be prolonged, the World Bank estimates the following economic declines: 

• 9.1% for the Eurozone
• 7% for industrialized countries
• 2.5% for emerging countries

Surprisingly, in China, the country where Covid-19 appeared, the economy is expected to grow by 1%.

Gita Gopinath states that in 2021 an increase of 5.4% is expected, as compared to 2020, but only if there would not be a third wave of the pandemic with SarsCov-2.

While in Germany the public debt, related to the economic performance, will exceed in 2020 the maximum level registered at the end of the Second World War, the Romanian officials rejected a future agreement with the Monetary Investment Fund. Yet, there are voices who ask for an IMF deal or at least suspect a deal after the Romanian elections.

Romania registered in the Q2 of this year a shrinkage of the economy of 12.3% compared to the Q1 and Q3 2020/2019 indicate a decline of 6%, second only to Spain who registered an even bigger decline, of 8.7%. Meanwhile, the average decline of the European Union countries was 4.3%, according to Eurostat. It is the biggest shrinkage of the economy in the last 24 years for Romania. However, the Romanian Minister of Finance is confident that the country can avoid the recession.

Romania’s public debt was already 450 billion lei in August this year, reaching over 42% of GDP and in October it reached even more, around 47%. The budgetary deficit is expected to exceed 9.1% at the end of the year.

In this context, even if Romania’s economy is expected to increase in 2021, the level of the unemployment is expected to raise up to 7%, an unprecedented figure since the country joined the EU. Hard times are expected and the evolution of the Romanian economy depends on the evolution of the European economy, but mostly on the evolution of the pandemic in 2021.

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According to Orban, though, Romania does not negotiate with the IMF for a new deal. On top of that, Romanian PM mentioned the fact that the rating agencies kept their evaluation regarding Romania’s economy, even if the rating is BBB- with a negative outlook.

There is also another type of agreement with the IMF: up to a limit of 2 billion USD, they offer you a deal without any conditions for you to finance the budgetary deficit, but at present we don’t need not even this sort of agreement.

Romanian PM, Ludovic Orban

Romania was not as hardly hit by the Corona-crisis as the other European countries. Despite the early pessimistic scenarios, it seems Romania will remain one of the few EU countries not to enter a recession during 2020.

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The possibility for an IMF deal was first brought to the general public during the pandemic, when the economic crisis ahead starting looking frightening enough even for the optimistic Romanian Government. Yet, despite the evidence, the officials strongly rejected the idea and hoped for a V-shaped recovery of the economy.

The Romanian minister of Finance boasted with this V-shaped recovery immediately after the consumption grew up again. Also, the PM Ludovic Orban clearly declared Romania didn’t need a deal with the IMF. He even named this rumor as being far fetched.

Still, Ionut Dumitru, chief economist at Raiffeisen Bank, told Ziarul Financiar, the most prestigious Romanian financial publication, that a deal with the IMF would be the only solution for Romania if the populist measures, such as the increase of the pensions and the doubling of the child allotment, are approved.

According to his opinion, the financial deficit could be 9% at the end of this year, but also could reach 12% if the pensions, the allotments and the salaries are increased this year.

Will Romania ask for a new deal with the IMF? At the moment there is no sign for the Government to do that. Yet, if the Parliament increases the revenues for some categories, then the deficit will skyrocket and the IMF could be a solution.

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The IMF’s new estimates are much more pessimistic than the World Bank’s, which last week forecast that Romania will see a growth of 0.3% in 2020, compared to an advance of 3.8% as estimated three months ago. The World Bank is also counting on a return to 4.4% in 2021.

At the same time, the IMF also revised its estimates of the current account deficit registered by Romania this year, up to 5.5% of GDP, given that in the autumn it forecast a current account deficit of 5.2% of GDP. The current account deficit level will decrease slightly to 4.7% in 2021.

The Minister of Economy, Virgil Popescu, said that the Romanian economy has a contraction of between 30 and 40%, given that the peak of the coronavirus epidemic has not yet been reached, also indicating that the most affected areas are tourism, HoReCa, transport and auto industry.

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Year after year Romania has grown more, not only in GDP, but also in purchasing power of its citizens. Moreover, the economy has become a strong one and Bucharest Stock Exchange Index, BET, ranked on the 3rd place in the world in 2019 by its growth!

Now, International Monetary Fund makes an economic prediction which might come as a surprise for most, but, taking into consideration Romania’s economic performance, it isn’t: in 2020 Romania will overgrow Turkey in terms of Purchasing Power Parity, and in 4 years it will reach both Greece and Russia.

More exactly, IMF predicts in 2020 Romania will have a GDP per inhabitant of 29,554 international USD, while in 2024 Romania will have, exactly as Greece and Russia, a GDP per inhabitant of 36,000 international USD.

At the moment, Romania has overgrown Croatia and Bulgaria regarding GDP per inhabitant in respect to the other European Union countries.

Photo explanation: the statue of Stephen the Great, one of the rulers of Romanian province Moldova, whose greatest accomplishment during his reign was opposing the Otoman Empire’s expansion between 1457–1504. He is praised by all Romanians for this and the Romanian Orthodox Church canonized him and made him “Stephen the Great and Saint”.

As opposed to what happened in the past, the history has changed and now Romania and Turkey have one of the closest economic relationships ever, with trade exchanges estimated at USD 7 billion a year. Yet, overgrowing Turkey in terms of GDP per capita would be an outstanding economic performance for Romania, an ex-communist state.

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