{
  "title": "Romania: Staff Concluding Statement of the 2025 Article IV Mission",
  "publication": "IMF News, September 12, 2025",
  "sourceUrl": "https://www.imf.org/en/news/articles/2025/09/12/cs-romania-staff-concluding-statement-of-the-2025-article-iv-mission",
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  "summary": "An International Monetary Fund (IMF) mission, led by Joong Shik Kang, conducted discussions for the 2025 Article IV Consultation with Romania during September 3-12.",
  "publishDate": "2025-09-12",
  "sections": [
    {
      "heading": "Outlook and short-term macroeconomic assessment",
      "content": "- Mission conducted during September 3-12, 2025.\n- Economy expected to grow gradually amid necessary fiscal consolidation.\n- Inflation will remain elevated temporarily before falling within NBR’s tolerance band by end-2026.\n- Real GDP growth:\n  - 0.8 percent in 2024.\n  - Projected 1.0 percent in 2025.\n  - Projected 1.4 percent in 2026.\n- Inflation:\n  - Core inflation 7.9 percent (y/y) in August (2025).\n  - Headline inflation 9.9 percent (y/y) after removal of electricity price cap and VAT increase.\n- Growth drivers and constraints:\n  - Strong private consumption in 2024 supported by robust wage growth.\n  - Continued contractions in investment activities in 2024.\n  - 2025 H1: weak growth momentum due to significant uncertainty weighing on sentiment.\n  - NGEU-funded investments expected to partly offset moderation in private consumption."
    },
    {
      "heading": "Deepening twin deficits and recent developments",
      "content": "- Fiscal deficit:\n  - Rose to 8.7 percent of GDP (cash basis) in 2024.\n  - Large fiscal deficit persisted through mid-2025 despite freeze on public sector wages and pensions in 2025.\n  - Drivers: significant increases in pension spending, public wages, and domestically financed public capital expenditure; continued increases in current expenditures.\n- Current account deficit:\n  - Reached 8.4 percent of GDP (2024).\n- Risks to outlook:\n  - Downside risks to growth and upside risks to inflation.\n  - Sovereign credit rating downgrade risk due to concerns about execution of planned fiscal consolidation for 2025-26 and medium-term sustainability.\n  - External risks: slower growth among major trading partners, higher trade barriers, uncertainty, intensification of regional conflicts reducing trade and FDI.\n  - Upside inflation risks: higher energy prices, adverse climate shocks affecting food prices, stronger-than-expected wage growth that could delay normalization of core inflation.\n  - Upside scenario: strong fiscal adjustment and EU-funded investment implementation could improve investor sentiment and lower risk premia, boosting private investment and growth."
    },
    {
      "heading": "Fiscal policy: consolidation, projections, and recommendations",
      "content": "- 2025–26 reform package:\n  - Welcome step including tax reforms (raising the standard and reduced VAT rates) and continued freeze on public sector wages and pensions in 2026.\n  - If fully executed, expected to reduce the primary fiscal deficits by about 1¼ and 2 percentage points of GDP in 2025 and 2026, respectively.\n  - Narrow overall fiscal deficit to about 6 percent of GDP in 2026 (if fully executed).\n- Medium-term projections and needs:\n  - Fiscal deficit projected to narrow gradually to about 5 percent of GDP by 2030, with public debt-to-GDP continuing to rise to close to 70 percent.\n  - Additional fiscal adjustments of about ⅔ percent of GDP per year on average from 2027 are needed to reduce the deficit to below 3 percent of GDP over the medium term and stabilize public debt at around 60 percent.\n  - Upfront specification of concrete measures effective from 2027 recommended to restore credibility and increase predictability of tax policy.\n- Tax policy and revenue mobilization:\n  - Romania’s tax revenue as a share of GDP is among the lowest in the EU.\n  - Recommendation: a tax reform package to mobilize revenues and improve fairness, while strengthening work incentives and remaining attractive to capital investment.\n- Public investment and fiscal governance:\n  - Need to make full use of available EU funds.\n  - Enhance public investment management by strengthening coordination and monitoring to support planning, allocation, and implementation.\n  - Continue prudence with wage and pension policies beyond 2026.\n  - Strengthen fiscal governance: integrate regular public spending reviews into annual budgeting; develop a stronger medium-term fiscal framework with credible medium-term revenue and expenditure strategies and contingency plans.\n  - Digitalization: planned introduction of a new digital budgeting platform is positive; ongoing digitalization can strengthen tax administration and public service provision."
    },
    {
      "heading": "Monetary policy and exchange rate stance",
      "content": "- Recommendation: NBR’s cautious approach remains appropriate.\n- Policy rate guidance:\n  - Policy rate cuts should resume only after inflation is on a firm downward trend and growth of wages and prices moderate in a sustained manner.\n  - NBR should stand ready to adjust the policy rate based on prevailing economic conditions and price dynamics.\n- Exchange rate:\n  - Greater two-way exchange rate flexibility over the medium term recommended to enhance resilience to shocks.\n  - Benefits: limit carry trade opportunities, mitigate balance sheet mismatches, enhance resilience to external shocks, and, together with fiscal adjustment, help strengthen the weak external position.\n  - Clear communication accompanying exchange rate flexibility emphasized."
    },
    {
      "heading": "Financial sector stability and supervision",
      "content": "- Banking system resilience:\n  - Banks remain well capitalized and liquid.\n  - NBR guidelines to retain profits combined with increased countercyclical capital buffer (CCyB) have bolstered capital and releasable buffers.\n  - Asset quality overall remains healthy, with the NPL ratio close to the EU average.\n- Emerging vulnerabilities and supervisory priorities:\n  - Monitor asset quality and stress-test liquidity amid growing sovereign exposure, buoyant consumer credit growth, and sizable unhedged FX loans.\n  - NBR’s effort to expand eligible collaterals according to risk-based haircut criteria is welcome and will strengthen the emergency liquidity assistance scheme.\n  - Authorities should be prepared to recalibrate macroprudential policies to align with evolving risks and ensure enhanced resilience."
    },
    {
      "heading": "Structural reforms to boost growth potential",
      "content": "- Key reform priorities:\n  - Strengthen efficiency of the state to make full use of EU funds and support growth amid fiscal adjustment.\n  - Establishment of an independent agency to monitor the large state-owned enterprises (SOE) sector is welcome; timely appointment of the board would strengthen oversight and efficiency.\n  - Improve predictability and quality of regulations to enhance the business climate and reduce informality.\n  - Increase labor force participation and productivity through better availability of childcare and investment in education quality in response to an aging population.\n- Energy transition and climate policy:\n  - Authorities submitted updated Integrated National Energy and Climate Plan and National Energy Strategy 2025–35 to achieve net zero GHG emissions by 2050 (submitted in fall 2024).\n  - Consider additional incentives to limit emissions in sectors not covered under the EU Emissions Trading System (ETS), including a complementary carbon tax in the transport and building sectors.\n  - A fully integrated and interconnected energy market within an EU-wide Energy Union remains crucial.\n\nInternational Monetary Fund staff concluding statement (Romania: Staff Concluding Statement of the 2025 Article IV Mission).\n\n---\n\n\n References\n\n- Romania and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/09/12/cs-romania-staff-concluding-statement-of-the-2025-article-iv-mission"
    }
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    "Published: September 12, 2025",
    "Mission conducted during September 3-12, 2025.",
    "Economy expected to grow gradually amid necessary fiscal consolidation.",
    "Inflation will remain elevated temporarily before falling within NBR’s tolerance band by end-2026.",
    "Real GDP growth:",
    "Inflation:",
    "Growth drivers and constraints:",
    "Fiscal deficit:",
    "Current account deficit:",
    "Risks to outlook:",
    "2025–26 reform package:",
    "Medium-term projections and needs:",
    "Tax policy and revenue mobilization:",
    "Public investment and fiscal governance:",
    "Recommendation: NBR’s cautious approach remains appropriate.",
    "Policy rate guidance:",
    "Exchange rate:",
    "Banking system resilience:",
    "Emerging vulnerabilities and supervisory priorities:",
    "Key reform priorities:",
    "Energy transition and climate policy:",
    "[Romania and the IMF](http://www.imf.org/external/country/ROU/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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