Economists' warning to Romanians: “Postpone all long-term projects. It's a year of survival”
Romania is entering a difficult economic year, in which consumption is falling, inflation remains high, and the “growth” of the past years is increasingly proving to be an illusion fueled by debt and populist policies. Economists consulted by “Adevărul” warn that the population will feel a harsh correction, while the lack of real reforms and the effects of wars risk pushing the economy towards stagnation or even recession.
Economists urge Romanians to be cautious in spending. Photo 123 RF
Cristian Păun, professor of economics at ASE, told “Adevărul” that Romanians should spend their income with great caution this year, because it is a year of survival, being advised to postpone all their big expenses.
“Romanians should postpone all long-term projects. It is a year of survival. If politicians refuse to take measures to improve the economy, Romanians must be cautious”stated Cristian Păun.
He added that it is normal for a country that has the biggest budget deficit to also have the biggest inflation in the EU, because in recent years we had a higher economic growth than other countries because we were borrowing, and the growth was based on consumption, not on production and investment.
“The fight against inflation is not based on price caps, but on the stimulation of production and tax reductions”, the economics professor explained to “Adevărul”, adding that the decrease in consumption comes against the background of problems from the past and that we are only now reaching a return to normal purchasing potential.
“And I explain to you what are the factors that contributed to the decrease in purchasing power. First of all, we are talking about the illusion of well-being created in the past by the fact that money was pumped into unsustainable increases in pensions and salaries, which implicitly led to the increase in the budget deficit. Then we are talking about the increase in inflation over a long period, for months in a row, but also a decrease in orders from the private sector. All this led to a decrease in consumption in the first months, and things cannot improve without reforms.
Romania should make real reforms, reduce the number of state-owned companies, have fewer parliamentarians, maybe only one chamber.
You can't grow the economy with such high inflation, because high inflation leads to a slowdown in economic growth”the economist explained to “Adevărul”.
Radu Nechita: We are paying for the errors and illusions of recent years
For his part, Radu Nechita, professor of economics at UBB, explained to “Adevărul” that the world economy will slow down because the current wars and the payment bill of past policies mean a destruction of lives, of wealth (military and civil infrastructure, weaponry) and a reduction in the ability to produce wealth (productive activities are blocked or at least embarrassed by higher costs, uncertainty).
“However, our political class will blame wars and other external factors, hiding its blame for the situation we are in now. Other countries are also facing difficulties, perhaps even greater because of the war, and yet they do not have our abysmal deficit and perpetuated by increases in public spending. In fact, in addition to this war which does not help us at all, we are in fact paying for the errors and illusions of all these years when immobility was painted as stability, in that unjustified increases in incomes by productivity were the cover for the increase in the privileges of the political class and those who protect it”, Nechita stated.
According to him, what we call economic growth refers to the variation in the gross domestic product, i.e. the increase in wealth produced in a country within a year.
“It is an approximation of prosperity that is relatively easy to understand, but which has limits that we must take into account, because this approximation can sometimes give errors and misinterpretations. It is generally better to increase GDP than to decrease it, but not all GDP growth is healthy. Examples of unhealthy GDP increases are found when governments go into debt for election campaigns, when abysmal policies are financed (forced industrialization in the communist era, which resulted in an industry unable to repay through sales in competitive markets the loans made, or more recently, total lockdowns during the pandemic).
In the case we are talking about now, with almost world wars, we could also have accounting surprises, where the GDP of some countries increases through indebtedness and the increase in the production of armaments. Missiles and exploding bombs inflate GDP but do not increase total wealth, quite the contrary“, added the economist.
In short, he added, it is important to distinguish between increases in GDP that reflect an increase in prosperity and increases in GDP that are an accounting illusion: “These illusions disappear at some point, as was the case with Romania. If the right measures are taken, the elimination of illusions translates into a reduction of the GDP, by bringing it down to earth, that is, to reality.
“We have to pay the price” – Economists' harsh warning for Romania in the midst of an energy crisis
In other words, not every recession, not every reduction in GDP is unhealthy: what matters is the causes and what comes next. This is precisely my reason for concern and, it seems, also for those who look at the Romanian economy from the outside.
In recent years, power and opposition competed in demagoguery, it was a veritable auction of proposals that only strengthened the privileges of a system of resource extraction at the expense of taxpayers. Power and opposition are at war to capture this extractive system, not to dismantle it. Very few politicians and “influencers” have proposed measures to dismantle this system, to reduce the reward for those who redistribute wealth for their own benefit and increase it for those who produce wealth. And the measures taken in this direction are even less than the proposals”the economist declared for “Adevărul”.
The IMF has halved Romania's economic growth forecast for 2026
The International Monetary Fund (IMF) has halved Romania's economic growth forecast for 2026, from 1.4% to 0.7%, according to the institution's latest World Economic Outlook (WEO) report.
The financial institution still expects Romania's economy to accelerate in 2027, when the IMF sees economic growth of 2.5%.
In the report, the IMF also estimates that the annual inflation rate in Romania will stand at 7.8% in 2026, another upward revision from the forecast of 6.7% in the fall. For 2027, the Fund estimates inflation of 3.9% in Romania.
The international financial institution expects a reduction in Romania's current account deficit this year. Thus, for 2026, the IMF now estimates a current account deficit of 6.8%, down from 8% in 2025. However, there has been a worsening here as well: in the previous forecast, the Fund saw a sharper reduction in the current account deficit, to 6.6%. For 2027, the financial institution sees a current account deficit of 6.2%.
Regarding the unemployment rate, the IMF estimates that it will be 6% in 2026 and 5.9% in 2027. Previously, the institution saw unemployment of 5.8% for 2026.
The forecasts were published on the occasion of the spring meetings of the International Monetary Fund (IMF) and the World Bank (WB), which are taking place this week in Washington.
The world economy could be on the brink of recession
The world economy could be on the brink of recession, warns the International Monetary Fund, which on Tuesday worsened its forecasts regarding the growth of the world economy this year, reports the Reuters agency, quoted by Agerpres. This against the background of the war in Iran, which led to increases in the price of energy and disruptions in the supply chain
Romania will have an economic growth half that of the initial estimates, according to the IMF
In the “World Economic Outlook” report, the IMF warned that the world economy could be on the brink of recession if the conflict worsens and the oil price remains above $100 a barrel until 2027.
The spring meetings of the International Monetary Fund and the World Bank this year are overshadowed by the economic shock of the war in the Middle East. The IMF presented three scenarios regarding the evolution of the world economy: weaker, more serious and severe, depending on how the war unfolds.
The most optimistic baseline scenario points to a short-lived war in Iran and forecasts global economic growth of 3.1% in 2026, down 0.2 percentage points from the January estimate. In this scenario, the average price of a barrel of oil will stand at 82 dollars throughout this year, a decline from the recent level of around 100 dollars of the futures price of a barrel of Brent.
Absent the war in the Middle East, the IMF said it would have upgraded its forecast for global economic growth this year by 0.1 percentage point to 3.4%, thanks to a continued boom in technology investment, lower interest rates, less severe US tariffs and fiscal support from some countries.
But the war posed a far more massive risk to the global economy than the initial tariffs announced last year by President Donald Trump, IMF chief economist Pierre-Olivier Gourinchas warned in an interview with Reuters.
“What happens in the Gulf potentially has a much, much stronger impact, and we analyze these developments through our scenarios”the IMF official explained.
In the negative scenario of a longer conflict, in which the price of a barrel of oil remains at around 100 dollars this year and 75 dollars in 2027, the IMF estimates that the world economy will register an advance of only 2.5% this year. In January, the IMF expected the price of oil to drop to around $62 in 2026.
In the IMF's most severe scenario, in which the conflict deepens and expands and the price of oil is much higher, causing major market disruptions and tightening financial conditions, global GDP will grow by just 2%.
