Romania in 2025–2026: Modest growth, high inflation and a major test for fiscal credibility – IMF analysis

Romania's economy is entering a period where every economic policy decision matters. The latest IMF report it shows a complex outlook: modest economic growth, inflation that remains high until 2026, and risks to fiscal stability and the country's rating. At the same time, investments financed by PNRR could balance some of the pressures, but only if the structural reforms are carried through to the end.

Modest economic growth, dependent on investment

The IMF estimates that Real GDP to grow by 1.0% in 2025 and 1.4% in 2026modest values ​​compared to the potential of the Romanian economy over the last decade.

The main source of support for growth will be acceleration of investments from PNRRwhile private consumption will noticeably slow down, hit by:

• inflation still high,
• increase in taxation (including VAT increase),
• budgetary consolidation required in 2025–2026.

Exports will not be able to offset weak domestic consumption as labor costs rise faster than productivity, eroding external competitiveness.

Inflation remains above the NBR's range until the end of 2026

Despite the decline in recent quarters, the IMF believes that inflationary pressures persist.

Total inflation remains high until mid-2026going down to the BNR lane barely in the fourth quarter of 2026. However, on Friday, with the presentation of the Inflation Report, Mugur Isărescu admitted that the inflation target could be delayed until the beginning of 2027.

The most important factors that keep it up:

• VAT increase in 2025,
• removing energy price capping,
• rapid wage growth,
• climate shocks that can increase food prices,
• possible increases in energy on international markets.

Under these conditions, the IMF recommends that the NBR not resume the cycle of interest cuts for the time being.

Fiscal consolidation — a critical test, and the country's rating is at stake

The IMF's message is direct: the risk of a downgrading of Romania's rating remains present.

Reason:

• deficit still high,
• uncertainties regarding the application of the fiscal package from 2025–2026,
• the lack of clear measures for 2027 and the following years.

The institution recommends:

• full application of the planned consolidation,
• the announcement as early as 2025 of the additional measures for 2027,
• a structural fiscal reform that addresses both collection and system equity.

Fiscal credibility, says the IMF, is essential for reducing risk premiums and, implicitly, for lower financing costs.

The pessimistic IMF scenario: what a more difficult economic world would look like

The IMF also includes an adverse global scenario, in which:

• Europe is growing more slowly,
• China has weaker domestic demand,
• a global trade war breaks out,
• financing costs are rising.

In this case, Romania's GDP would be with 0.9 percentage points below the current forecast level in 2026.

The budget deficit would automatically increase by 0.2 pp of GDP per yearputting additional pressure on public finances.

In such a context, the IMF recommends:

• temporary fiscal support granted to vulnerable households and companies,
• the continuation of fiscal consolidation,
• more exchange rate flexibility to absorb shocks.

Monetary policy: maximum caution

The IMF warns that defusing inflationary expectations is a real risk.

In this context:

• the key rate should not be reduced too soon,
• wage pressures must be carefully monitored,
• exchange rate flexibility should be gradually increased in the coming years to increase the economy's ability to absorb external shocks.

Financial sector: stable but with emerging vulnerabilities

Although the systemic risk is considered limited, the IMF points out some sensitive points:

• increasing exposure of banks to public debt,
• rapid growth in consumer credit,
• the need for more rigorous stress tests.

Banks are resilient, but supervision needs to be strengthened in a context of increased volatility.

Structural reforms: the biggest vulnerability, but also the biggest opportunity

The IMF says explicitly: structural blockages are Romania's main brake.
The identified priorities are:

• better governance in state-owned companies, including the swift appointment of the watchdog's new board,
• more predictable rules and better made regulations,
• reducing informality,
• attracting foreign investment,
• increasing participation in the labor market and productivity,
• more accessible childcare services,
• investments in the quality of education,
• preparation for the energy transition and full integration into the Energy Union.

Conclusion

The IMF report describes a Romania in a fragile balance: with economic growth, but below potential; with inflation falling but still too high; with consistent European investments, but with a real fiscal risk; with reforms ambitious on paper but delayed in practice.

The key to the years 2025–2026 will be credibility: fiscal, institutional and governance. Without it, the country's rating, funding costs and growth prospects remain vulnerable