The desk believes Romania's economic deceleration presents both challenges and opportunities, as potential GDP growth is now estimated at about 2.0%, down from approximately 3.7% pre-pandemic. Per the full note , investment cycles may improve this to between 2.4% and 2.7% by 2027-2029, highlighting that growth has shifted gears rather than come to a halt. Amidst fiscal constraints and external pressures, actual GDP is forecasted to contract in 2026, indicating significant economic strain. This nuanced outlook suggests that while Romania's convergence game is still viable, it faces substantial headwinds that traders must consider.
What the desk is arguing
The desk posits that Romania's reduced potential growth, currently at about 2.0%, represents a critical inflection point for the economy. Per the full note , the high inflation and subdued consumption are key factors impacting actual GDP, estimated to decline further over the next year.
With substantial public investment underway, the desk sees a potential improvement in growth rates toward 2027-2029, aligning expectations with an upward trajectory despite current cyclical challenges. Romania's potential growth is set to diverge significantly from pre-pandemic estimates, as structural constraints begin to limit the speed of convergence with Western Europe.
Where it sits in our coverage
Our current consensus target for the EUR/RON stands at 1.075, within a range of 1.04 to 1.12. Specific targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's outlook sits at the upper end of the consensus range, reflecting a more optimistic view of potential recovery than some peers who have more bearish forecasts.
How other firms see it
Alignments in outlook are seen among firms like jpmorgan, which shares a more positive perspective, while bofa adopts a more cautious stance.
The EUR/RON currency pair is expected to reflect these economic challenges, while Romania's external pressures on inflation suggest careful monitoring of the HICP data and potential ECB policy implications.
What the calendar says
No significant events are scheduled that would immediately impact this outlook, which reinforces the importance of monitoring economic indicators and sentiments continuously as we move through the year.
01Romania's potential GDP growth has decreased to about 2.0%, down from 3.7% pre-pandemic levels.
02Investment cycles may improve growth projections to 2.4%-2.7% by 2027-2029, offering some hope.
03Current economic pressures, including inflation and external demand, are driving actual GDP below capacity.
04The consensus for EUR/RON sits at 1.075, reflecting a range of opinions among major banking institutions.
Market implications
Traders should closely observe any shifts in investor sentiment surrounding the EUR/RON pair, particularly in light of Romania's cyclical downturn. A significant move through the consensus target of 1.075 could suggest stronger trends influenced by upcoming economic indicators.
Risks to this view
A reversal in this outlook could occur if inflationary pressures dramatically drop or if external demand rebounds unexpectedly, which would change growth dynamics and potentially lead to a stronger RON against the EUR.
Articles Romania’s lower speed limit Published 08:15 Romania Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Romania's growth engine has slowed, with potential GDP growth falling to c.2.0% from 3.5%-3.75% before the pandemic. A powerful investment cycle is preventing a steeper decline and could raise potential growth to 2.4%-2.7% by 2027-2029. The next challenge will depend less on how much Romania builds, and more on how productively it uses those new assets Valentin Tataru The convergence journey continues, but no longer in the fast lane Romania has spent much of the past two decades catching up with Western Europe at remarkable speed.
GDP per capita in purchasing power standards rose from about 44% of the EU average at EU accession in 2007 to 78% in 2025. Labour productivity increased rapidly, foreign capital brought technology and know-how, workers moved towards more productive activities and EU integration delivered a substantial investment dividend. We believe that the convergence story is not over, but the easy gains are.
That convergence machine has changed gear The Romanian economy grew by only 0.7% in 2025 and is about to post an annual contraction in 2026. We estimate a pick-up to around 2.2% in 2027-2028. Much of the present weakness is cyclical: fiscal consolidation, high inflation, subdued consumption and soft external demand are pushing actual GDP below capacity.
Potential GDP asks a different question: how fast could the economy grow, with labour and capital employed at normal rates and without continuously adding inflationary pressure? Our answer is roughly 2.0% today. That is substantially less than before the pandemic.
The IMF estimated potential growth at about 3.7% in 2017-2019, largely similar to the European Commission’s estimates, and its 2025 Article IV put it at 2.0% in 2025 and 1.8% in 2026. Our central view is that the current downturn probably exaggerates the extent of the structural damage. As the investment cycle continues and cyclical headwinds fade, potential growth could recover to 2.4%-2.7% during 2027-2029.
Getting sustainably above 3.0% again (as in the IMF's projections for 2029-2030) would require stronger labour utilisation and a much better productivity return on investment. Potential growth is an estimate, not an observable fact Potential GDP cannot be measured directly. It has to be inferred from models, which is why estimates can vary.
For Romania, the current spread between various observations is rather wide. The IMF sees a temporary trough followed by a strong recovery in supply capacity. Romania's 2026-2028 medium-term fiscal plan embeds a much weaker profile.
The EC’s published growth and output gap forecasts imply a weaker near-term path. Fitch's August 2026 assessment offers a useful and fresh cross-check: it expects growth to recover to an estimated potential rate of about 2.3% in 2027-2028. Romania's potential GDP growth - estimates by institution * author calculations from published real GDP and output-gap forecasts "> * author calculations from published real GDP and output-gap forecasts The gap between estimates does not make the concept useless, but it is a warning against false precision.
Our reading sits between the weaker assumptions from Romania’s fiscal plan and the stronger IMF-estimated figures. The structural slowdown is real, but the 2025-2026 cyclical shock is probably making the trough look worse than the medium-term trend. What sits behind the headline numbers A simple way to think about potential growth is that an economy can produce more because it has more capital, more effective labour, or combines the two more efficiently (trend total factor productivity).
The European Commission formalises this with a Cobb-Douglas production function: g(potential GDP) ≈ g(trend TFP) + 0.35 × g(capital) + 0.65 × g(potential labour) If productive capital grows by 3%, effective labour is flat and trend TFP rises by 1%, potential GDP growth is just slightly above 2.0%. That is close to the order of magnitude we think describes Romania today. The 65% labour weight is the standard EU methodology.
A Romanian study suggests labour's historical income share may be lower, implying a larger role for capital. However, changing factor shares mainly redistributes growth between capital and productivity rather than fundamentally altering the conclusion. For comparability, we stick to the European Commission framework.
Contribution to potential growth Author calibration based on European Commission, IMF, Eurostat/OECD labour data and investment trends. These are ranges, not econometric point estimate "> Author calibration based on European Commission, IMF, Eurostat/OECD labour data and investment trends. These are ranges, not econometric point estimate The message is clearer than the exact decimals: the constraint is not a lack of investment.
It is weaker productivity growth and less favourable labour dynamics. Gross fixed investment has recently been around one-quarter of GDP and public investment is exceptionally high. Reasonable assumptions for the capital-output ratio and depreciation put the capital contribution near one percentage point.
The demographic trend is negative, but participation, migration, structural unemployment and hours worked matter too, so the current labour drag is probably small. The residual is trend productivity, at roughly 1.0-1.2 percentage points. Capital: the 2027 handover is the key test The optimistic part of the story is the investment pipeline.
New roads, railways, energy infrastructure and digital networks increase the capital stock directly. They can also boost productivity by reducing transport costs, widening labour markets, improving energy access and lowering administrative frictions. These gains arrive with a lag, which is why potential growth may improve even as the economy struggles in the short term.
The challenge is that 2027 marks a transition point. The Recovery and Resilience Facility ended in August 2026, while cohesion-funded projects continue. EU inflows should remain substantial but lower than during the peak years.
Public investment is therefore likely to moderate, making the handover from public to private investment increasingly important. If better infrastructure encourages factories, logistics capacity, energy projects and digital investment, capital can continue contributing close to one percentage point and TFP should improve as the assets are used. If private capex does not respond, Romania will have experienced a very large investment cycle without a matching increase in its permanent growth rate.
The difference is worth several tenths of a percentage point of potential growth. Labour: demographics matter, but they are not everything Romania's population fell from 23.2 million in 1990 to 19.0 million in 2025. The population aged 20-64 dropped from 13.4 million to 11.0 million and the OECD projects only 8.5 million by 2050.
Taken mechanically, that path would eventually subtract around 0.6-0.7 percentage points a year from potential growth under the EU production function weight. But potential labour is not determined by demographics alone. It also depends on participation rates, employment, skills and hours worked.
In 2025, only 69.0% of Romanians aged 20-64 were employed, compared with 76.1% across the EU; female employment was 59.5%. These gaps matter. The IMF estimates that closing the participation gap with the EU average could raise the labour force by 14.5% and the level of potential GDP by about 6.5%.
That is a level effect, not an annual growth rate, but it is economically large. For 2027 and beyond, the labour scenario therefore depends on whether Romania can employ more women, young people and older workers, reduce informality, improve health and childcare and use migration more systematically. Population ageing is largely predetermined but labour utilisation is not.
Productivity is where most of the growth has gone missing Productivity is where most of the old growth has gone missing. The European Commission estimates that real labour productivity per hour grew by around 4.5% a year in 2015-2019 but only about 2.0% in 2020-2025. Some slowdown was inevitable as the economy became richer and the easiest gains from reallocation, imported technology and integration into European supply chains were used up.
Yet Romania still has plenty of room to catch up. The EC data shows that R&D spending was around 0.5% of GDP in 2025, compared with 2.2% in the EU. Business R&D was 0.3% of GDP; only 8.8% of firms introduced a product or process innovation in 2020-2022; and tertiary attainment among 25-34-year-olds was 23.2%, barely half the EU average.
The encouraging part is that Romania already hosts highly productive firms and sectors, many integrated into international supply chains. The challenge is diffusion: spreading technology, management practices and skills beyond a relatively small group of firms and urban centres. This is important because the slowdown in potential growth cannot be explained primarily by weaker capital accumulation or labour supply.
Investment remains high, and the labour contribution has changed only modestly. Most of the decline therefore shows up in trend TFP, which captures how efficiently labour and capital are used across the economy. In practice, that points to slower technology adoption, weaker innovation and a slower spread of productivity-enhancing practices from frontier firms to the rest of the business sector.
Whether the current TFP contribution is +0.6pp, +0.8pp or +1.1pp is less important than the directional change: it is well below the 2ppt-plus contribution that underpinned Romania’s fast convergence years. AI can help AI and automation are particularly relevant for Romania because they can address two challenges simultaneously: labour-saving technologies become more valuable as the population ages, while digital tools can help spread efficient practices beyond a relatively small group of highly productive firms. The World Bank’s 2026 Innovation Rising work estimates that broader adoption of digital technologies, including software and AI-enabled tools, could ultimately lift labour productivity levels by as much as 10%-15% across Bulgaria, Croatia, Poland and Romania.
The word “levels” matters: this is not 10%-15% annual productivity growth. It is a cumulative gain that would materialise only as firms adopt and reorganise around the technology. Our baseline therefore contains no heroic AI uplift.
In an upside scenario, faster diffusion could plausibly add a few tenths of a percentage point to annual potential growth for several years. But that requires complementary investments in skills, management quality, R&D, financing and firms with enough scale to deploy the technology. So how fast can Romania really grow?
Three paths for Romania's growth speed limit Scenario ranges are author estimates, informed by IMF, European Commission, OECD, Eurostat and World Bank evidence. They are not official forecasts "> Scenario ranges are author estimates, informed by IMF, European Commission, OECD, Eurostat and World Bank evidence. They are not official forecasts The near-term estimate is unusually uncertain because the current downturn distorts real-time measures of trend growth.
The medium-term range is better anchored by the investment pipeline. Beyond 2029, the range widens again: public investment normalises, demographic drag becomes more visible and productivity has to do more of the work. This is also why 2.0% potential growth today does not cap actual growth at 2.0%.
If output starts below potential, actual GDP can grow faster for a time as the gap closes. The speed limit matters over time, not in every quarter. Why potential growth matters in the end Estimating potential growth is difficult but getting it wrong can have real policy consequences.
For wages, productivity is the anchor. If productivity growth settles near 2.0%, repeated real wage gains of 5.0%-7.0% or even higher would be hard to sustain without squeezing margins, raising prices or damaging competitiveness. For fiscal policy, lower potential growth means slower trend revenue and less favourable debt dynamics.
Cutting productive investment to protect current spending can improve today’s deficit while weakening tomorrow’s potential GDP and, ultimately, the fiscal ratios measured against it. The uncertainty also matters for structural budget estimates. Overestimating potential GDP can make a structural deficit look cyclical; underestimating it risks tightening policy unnecessarily.
Even so, potential growth of around 2.5% is not stagnation. If the EU grows by roughly 1.0%-1.5%, Romania can continue converging, only more slowly than during the exceptional catch-up of the past two decades. The investment bridge Romania is not running out of things to build or scope for convergence.
It is running out of easy sources of growth. Potential growth of 3.5%-3.75% was plausible before the pandemic. Today, around 2.0% looks more realistic, with a gradual recovery towards 2.4%-2.7% possible over the next few years, albeit with a wide uncertainty band.
In the end, public investment can create opportunities, but it cannot guarantee lasting growth. Whether Romania's speed limit rises again will depend on productivity, labour-force participation and the ability of firms to turn new roads, railways, energy infrastructure and digital networks into higher-value economic activity. Romanian industry Romania wage growth Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Valentin Tataru Chief Economist, Romania Valentin is an economist at ING in Bucharest, covering Romania, Bulgaria, Serbia and Croatia. He joined ING in 2007 as a trader and graduated with an MSc in Economics from the Bucharest Academy of… In this article That convergence machine has changed gear Potential growth is an estimate, not an observable fact What sits behind the headline numbers Capital: the 2027 handover is the key test Labour: demographics matter, but they are not everything Productivity is where most of the growth has gone missing AI can help So how fast can Romania really grow?
Why potential growth matters in the end The investment bridge