Romania has been one of the strongest performing emerging economies, but periods of accelerated economic growth, accompanied by imbalances, have raised concerns. Over the past two decades, real GDP has grown by an average of +3.7% annually, exceeding the average of EU member states in Central and Eastern Europe, according to Allianz Trade. The economy was hit hard by the global crisis generated by the pandemic in 2020 (-3.7%), registering a growth of 5.7% in 2021. However, the economic outlook deteriorated significantly with the outbreak of the war in Ukraine, due to the previous dependence on energy imports from Russia and the impact of EU sanctions, which amplified inflation and the risk of energy shortages.

Supported by robust consumption, Romania’s economy held up better than expected in 2022, with investment and external demand growing by +4.1%. However, rising inflation, high interest rates, falling external demand and reduced business confidence slowed economic expansion in 2023, with real GDP growing by just +2.1%. In 2024, the economy slowed even further, with growth of +1.4% in the first half of the year, followed by a -0.3% decline in the third quarter, resulting in a modest annual growth of just +0.8%.

For 2025 and 2026, analysts expect an economic acceleration estimated at +3.1% and +3.6%, supported by resilient public investment, a recovery in domestic consumption and a gradual easing of monetary policy. Although the National Bank of Romania (BNR) aims to keep inflation at a stable level (2.5% ± 1pp), monetary policy has been loose for a long time. The real interest rate was negative between 2017 and October 2023, and inflation reached double-digit levels between 2022 and 2023, largely due to rising energy prices.

“At the micro level, local companies are under pressure due to the high cost of credit and the slowdown in domestic consumption, while exports are failing to compensate for this decline,” says Mihai Chipirliu CFA – Risk Director, Allianz Trade. “In this context, it is not surprising that the number of insolvencies increased significantly last year, by almost +10 per cent, as a natural consequence of the deterioration of financial indicators, especially liquidity. The most exposed sectors remain construction, especially the residential segment, and wholesale and retail trade, where declining profit margins, cash flow constraints and payment delays are putting major pressure on firms’ stability.

Despite these challenges, the analyst believes that the current problems are “still manageable”, provided that measures to reduce the budget deficit and favourable base effects, such as a good agricultural year, are implemented. “However, a possible downgrade of the country’s credit rating in the second quarter, also linked to the results of the May elections, could have a much more severe impact on the cost of financing and interest rates, amplifying the economic risks for Romania.”

The National Bank of Romania increased the reference interest rate from 1.25% in September 2021 to 7.00% in January 2023, in order to control price increases. Then, in July 2024, it started to gradually reduce the interest rate, now reaching 6.5%. The Central Bank has also frequently intervened in the foreign exchange markets to maintain the stability of the RON/EUR exchange rate, a strategy that will continue as long as it has sufficient foreign exchange reserves. Inflation will remain more persistent than in neighboring economies, supported by strong wage growth, rising food prices and loose fiscal policies. After reaching 5.6% in 2024, inflation is forecast to decline to 4.5% in 2025 and 3.4% in 2026.

Public and external finances of concern

In Romania, the public finances situation continues to deteriorate, becoming a cause for concern. Pro-cyclical fiscal stimulus led to an increase in the budget deficit to -4.3% of GDP in 2019, and this imbalance widened significantly in 2020 (-9.3%) and 2021 (-7.2%), amid economic support measures related to the Covid-19 pandemic.

In 2022-2023, the annual deficit remained high, at over -6% of GDP, reflecting both the decline in tax revenues and the increase in spending in response to the crisis generated by the war in Ukraine. Although fiscal consolidation measures are planned, the deficit is estimated to remain above -5% of GDP in the period 2024-2026. In parallel, public debt increased from 35% of GDP in 2019 to 49% in 2023, and estimates indicate that it will exceed the 50% threshold in the period 2024-2026.

Another reason for concern for the Romanian economy is external finances. The current account deficit, i.e. the difference between what Romania imports and what it exports, has been steadily increasing, reaching -9.3% of GDP in 2022 and remaining high in 2023-2024, at over -7%. A worrying aspect is that only 30% of this deficit was covered by foreign direct investment, much less than the 75% considered acceptable. Moreover, this proportion has decreased significantly compared to 2016, when 168% of the deficit was covered by such investments.

For 2025-2026, exports and imports are estimated to grow at a similar pace, keeping the current account deficit at over -6% of GDP. At the same time, its coverage by FDI will remain below 50%, as capital flows to weaker emerging markets will remain modest amid global economic uncertainties. This context, corroborated with high fiscal deficits, could increase external financing needs to critical levels. On the other hand, the NBR’s foreign exchange reserves have recovered from temporary lows in 2022, reaching USD 70 billion in August 2024, the equivalent of five months of imports – a level considered adequate. However, these do not fully cover the external debt payments due in the next 12 months, being below the comfort threshold of 125%.

The business environment in Romania is generally favorable, although some vulnerabilities persist. The World Bank’s annual Worldwide Governance Indicators suggest that regulations and the legal framework are broadly business-friendly, but perceptions of corruption remain a problem. The Heritage Foundation’s 2024 Index of Economic Freedom ranks Romania 51st out of over 180 economies, highlighting strengths in the areas of property rights, tax burden, trade freedom, and investment freedom. However, there are weaknesses in government integrity and financial freedom.

In the Allianz Trade Environmental Sustainability Index, Romania ranks 54th out of 210 economies, performing well in energy efficiency, CO₂ emissions per unit of GDP, and water stress. However, vulnerabilities persist in renewable energy production, recycling rates, and the capacity to adapt to climate risks.

Systemic political risk is moderate, but political volatility is high. However, political uncertainty affects the prospects for fiscal consolidation. In December 2024, the Constitutional Court annulled the presidential elections following allegations of foreign interference, prompting new elections to be held in spring 2025. Although a new pro-European four-party government was formed, its stability remains uncertain.

In 2024, Allianz Trade upgraded the risk ratings of 48 economies, 27 more than in 2023, while only five countries were downgraded, one downgrade more than in the previous year. These upgrades reflect a partial recovery in global economic growth and financing conditions. The majority of the upgrades were concentrated in emerging markets, with Latin America seeing the most rating upgrades (13), followed by Europe (10) and the Asia-Pacific region (9). However, only 17 of these upgrades are for the long term, suggesting that the progress is largely cyclical in nature. In contrast, the majority of downgrades were in the Middle East, including Bahrain, Israel and Kuwait. This trend is driven by prolonged supply chain tensions and oil prices below the fiscal breakeven point.

Economic risks remain elevated in 2025-2026 despite global improvements

While the global economic outlook has improved on the back of falling inflation, credit flows and more favorable liquidity conditions, downside risks still remain elevated for 2025-2026. In emerging markets, the business climate remains challenging, while developed economies face prolonged political uncertainty and looming fiscal consolidation measures. In addition, the risk of recession is amplified by the threat of a new trade war, while inflationary pressures could erode corporate confidence, leading them to remain in a prolonged state of caution and expectation. The analysis of country risk sub-ratings shows that the economic recovery, compared to the pre-pandemic period, is visible, in particular, in the level of macroeconomic conditions, which have improved overall due to progress in 2024. The global average score exceeded pre-pandemic levels, reaching 3 out of 6 (equivalent to a BB rating). However, the structural business environment (SBE) remained below pre-pandemic levels, with a B-equivalent rating. In 2024, 18 countries, including Saudi Arabia, Taiwan, Japan, Romania and Chile, recorded deteriorations in their business climate.

While there have been some partial improvements due to the normalization of insolvencies in the business environment, commercial risk still remains below pre-pandemic levels. In 20244, the number of insolvencies increased in two out of three countries, and large companies were not immune to this phenomenon. Thus, last year there was more than one insolvency per day among companies with a turnover of over EUR 50 million, a record high. For 2025, Allianz Trade analysts expect the Global Insolvency Index to reach a stable level, after three consecutive years of growth. However, insolvencies will continue to trend upwards, accounting for 50% of global GDP, including in the US, Germany, Italy, Spain and China.

Macroeconomic imbalances remain a concern

The economy benefits from membership of the European Union and strong international relations, supported by a competitive industrial sector, a low unemployment rate and a suitable business environment. However, government instability and the lack of structural reforms in key economic sectors remain major challenges. The poor financial situation of the public sector, large current account deficits – only partially covered by foreign direct investment – ​​and the burden of external debt represent additional risks to macroeconomic balance.