Romania has great tech and is the region’s top energy producer, yet it’s mired in an economic slump.
This article appears in the November issue of Global Finance Magazine.
For investors, southeastern Europe’s largest and most diversified country remains a mystery.
Renowned for its potential, Romania boasts a thriving information, communications, and technology sector; unicorn start-ups such as automation software company UiPath; and regional stars like OMV Petrom, the region’s largest energy producer; renewables producer Hidroelectrica; and Automobile Dacia. But development has gone badly off track, making Romania an outlier to the region’s upbeat picture.
Romania recorded negative growth of 0.8% in the first half of 2026, down from just 0.7% for all of last year, according to the latest Regional Economics Survey from the European Bank for Reconstruction and Development. The fiscal deficit, the current account deficit, and inflation remain either the highest or among the highest in the EU.
A dramatic drop in foreign direct investment inflows, from €3.4 billion ($3.82 billion) in the first half of 2025 to just €527 million in the first half of this year, suggests difficulty in covering a predicted 2026 current deficit of €14.2 billion, leaving Romania heavily dependent on EU fund inflows, which have increased 32.5% year-over-year to €5.16 billion.
What Went Wrong?
Romanians are being hit by steep hikes in energy and food prices and persistently high inflation. But much of the blame for the country’s failure to address these problems lies with its fractured, ineffectual political class, which has blocked attempts by successive coalition governments to control spending and carry out structural reforms.
Romania has been without a government since May 5, when one of Prime Minister Ilie Bolojan’s coalition partners, the Social Democrats, sided with the far-right Alliance for the Union of Romanians to block a package of spending cuts intended to address a rising budget deficit. Since then, Bolojan has been unable to pass a budget or form a new government, causing the Romanian leu to depreciate and dramatically boosting inflation and borrowing costs.
“Romania’s political class is doing what Italy’s did in the late 20th century, ramping up spending and debt to unsustainable levels,” said Charles Robertson, head of Macro Strategy at consultancy FIM Partners. “Bond markets now price Romania as a junk bond country, although the rating agencies have it just inside investment grade, all with a negative outlook.”
In its last review, on July 31, Fitch Ratings affirmed Romania at BBB- Negative, citing “deteriorating public finances due to large, albeit declining, fiscal deficits and rising government debt/GDP.”
Malgorzata Krzywicka, director on Fitch Ratings’ Emerging Europe Sovereign team, expects Romania’s economy to contract by 0.6% this year, bringing average real GDP growth to just 0.3% in 2024-26, compared with 4.7% in 2015-19. Potential growth has fallen from about 3.5% before the pandemic to closer to 2%.
“The key challenge,” she said, “is whether private investment and recent structural reforms can offset these trends as EU funding gradually normalizes from recent peaks and public investment becomes a less powerful growth driver.”
Can Confidence Be Restored?
Yes, but Romania’s political class must get its act together, said Radu Cracan, regional, policy & strategy economist at the EBRD.
“We strongly advocate for better and more reliable governance, more targeted and private sector-facing economic policymaking, more innovation, and better skills and human capital,” he said. “Ensuring a predictable regulatory and fiscal environment will be critical for foreign investor confidence.”
That’s a tall order for a country that has long puzzled investors by failing to make progress on these fronts.
Nic Wirtz is a contributing writer based in Guatemala.