Economic Outlook for Romania

Romania’s economic landscape is expected to undergo significant changes in the coming months. According to ING Romania economist Stefan Posea, the consumer price inflation will rise to 7.5%-8.0% year-over-year (y/y) in the near future, before stabilizing around 7.5% by the end of the year. However, due to high base factors, the inflation rate is projected to decrease to 4.0-4.5% y/y by the end of 2026.

Factors Influencing Inflation

The elimination of indexation of public salaries and pensions in 2026 is expected to contribute to cautious saving trends, which will likely continue in the coming quarters. Additionally, reforms aimed at broader optimizations in the public sector, to be announced in July, will introduce new risks to the evolution of demand. These dynamics could push this year’s GDP growth closer to stagnation, with the risk of the economy slipping into a mild recession or even registering an annual contraction.

Impact on Consumer Confidence

Consumer confidence has visibly deteriorated since the beginning of the year, amid expectations of rising unemployment. The consumption impulse seems to have passed its peak, and households are taking a more cautious position. The government’s measures, including a higher VAT rate and excise duties as of August, and no public wage and pension hikes in 2026, will directly impact purchasing power.

Monetary Policy

The National Bank of Romania (BNR) is likely to adopt a prudent position and maintain the key monetary policy interest rate at the current level of 6.5%, at least until the first quarter of 2026. This decision will be influenced by the evolving economic landscape and the need to balance inflation and growth.

Conclusion

In conclusion, Romania’s economy is facing significant challenges in the coming months, with rising inflation, decreasing consumer confidence, and a potential stagnation of GDP growth. The government’s measures and the BNR’s monetary policy decisions will play a crucial role in shaping the country’s economic future. As the situation continues to unfold, it is essential to monitor the developments and adjust strategies accordingly to mitigate the risks and capitalize on opportunities.