The leu is expected to depreciate further in 2027, following a weak performance this year, but the main risks to the exchange rate, sovereign borrowing costs and credit rating stem from political uncertainty and the trajectory of the budget deficit.
“Romania’s macroeconomic adjustment is finally starting to become visible, but progress remains vulnerable to political uncertainty. The budget deficit is shrinking, and the country has maintained its investment-grade rating,” ING Bank Romania economists Valentin Tataru and Stefan Posea said in the bank’s latest regional report, cited by Profit.ro.
However, Romania still has a negative rating outlook and is only one notch above speculative grade, leaving little room for mistakes, the economists note.
“The political deadlock risks overshadowing fiscal progress and keeping the sovereign risk premium high. With the economy having been quasi-stagnant for almost three years, continued consolidation will be difficult,” they added.
The report appears to have been drafted before the appointment of Romania’s new government. ING said a political agreement on the fiscal framework for the next two years could improve the rating outlook, strengthen confidence and reduce financing costs. The actual political normalisation achieved by the minority Social Democrat (PSD) cabinet of Luca Niculescu and the six-month political agreement are weaker than the "political agreement on fiscal framework" assumed by ING.
“Romania’s economy remains stuck in a low-growth mode,” the economists said, after GDP fell by 0.8% in H1 2026.
In 2024 and 2025, the economy grew by 0.9% and 0.7%, respectively.
ING forecasted a GDP contraction of 0.5% this year, amid declining private consumption, which made a negative contribution of 1.4 percentage points to GDP growth in H1. Services and industry contracted, while construction and public investment financed by EU funds supported economic activity.
Consumption to normalise as pension and salary indexation resumes
“The pressure on households has been unusually severe,” the economists said, pointing to an annual contraction in retail sales of 6% in Q2 2026, following a 5.2% decline in Q1.
“This evolution reflects high inflation, slowing wage growth, the freezing of public-sector wages and pensions, and tax increases. More recently, however, the pace of contraction seems to have moderated,” the analysts noted, pointing to the beginnings of stabilisation in consumption.
ING’s forecast for next year also hinges on a recovery in household spending.
The Dutch bank expects economic growth to accelerate to 2.2% in 2027.
“The forecast is based on a likely return to pension and wage indexation from January 1, which should partially restore households’ real purchasing power, alongside a decline in inflation,” ING said.
The economists stressed that this assumption is important. If indexation is limited or new fiscal measures are introduced, GDP growth will depend more heavily on investment and exports.
“Conversely, a credible political agreement could improve confidence and reduce precautionary saving, potentially generating a somewhat stronger consumption response,” the economists argued.
After contracting by 0.9% in 2026, private consumption is expected to grow by 1.9% in 2027, although this would be almost three times slower than in the election year of 2024, when consumption increased by 5.7%.
Although the PNRR recovery plan has ended, this does not necessarily leave a funding gap, as standard EU cohesion funds remain available to finance public investment. ING expects investment to increase by 1.1% next year, compared with an estimated 5.8% advance in 2026.
Industrial production is forecast to rebound slightly, by 0.5% in 2027, after contracting by 4% this year, which would mark a third consecutive annual decline. Industrial output has fallen by 3.8% since the beginning of the year amid weak demand and high energy costs. ING does not foresee a new growth cycle capable of supporting a pronounced recovery, with stabilisation the most favourable scenario suggested by recent data.
Fiscal position improving, but remains a major source of uncertainty
The cash budget deficit fell to 2.9% of GDP in the first eight months of 2026, from 4.5% in the same period of 2025, supported by higher tax revenues and a nominal freeze on spending on salaries and pensions.
ING considers this an important improvement and believes the government’s target of a deficit of 6.2% of GDP for 2026 is within reach. However, the main challenge is the outlook from this point onwards. Political uncertainty also limits visibility on the 2027 budget.
“This is precisely where the rating risk is concentrated. The investment-grade rating was maintained, but Romania has not yet exited the risk zone. A credible fiscal framework, clearly backed politically, would help consolidate the current adjustment and could stabilise the rating outlook. Without it, better short-term execution could be partially offset by higher funding costs and currency risks,” ING said.
For 2026, ING forecasted a cash deficit of 6% of GDP. In 2027, the deficit is expected to narrow to 5.1% of GDP, compared with 8.6% in the 2024 election year.
Other forecasts
The trade deficit has narrowed this year amid contracting consumption. ING cautions that this adjustment does not necessarily reflect improved external competitiveness or higher domestic production. The expected recovery in consumption next year should also revive imports.
“If exports and domestic supply do not strengthen more decisively, progress in reducing the trade deficit risks stalling,” the economists said.
Inflation is expected to remain relatively high. After falling from a peak of almost 11% to 6.2% in August, partly due to a base effect, inflation accelerated again to 6.6% in September, mainly because of higher fuel prices.
“Underlying inflationary pressures remain persistent,” the economists emphasised.
In services, past wage increases continue to exert pressure, while lower margins limit companies’ ability to absorb cost increases.
“The combination of weak economic activity and persistent domestic inflation remains one of the central features of the current macroeconomic picture,” the analysts explained.