## Romania: Staff Concluding Statement of the 2025 Article IV Mission

_IMF News, September 12, 2025_

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## Bibliographic details
- Published: September 12, 2025

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### Outlook and short-term macroeconomic assessment
- 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:
  - 0.8 percent in 2024.
  - Projected 1.0 percent in 2025.
  - Projected 1.4 percent in 2026.
- Inflation:
  - Core inflation 7.9 percent (y/y) in August (2025).
  - Headline inflation 9.9 percent (y/y) after removal of electricity price cap and VAT increase.
- Growth drivers and constraints:
  - Strong private consumption in 2024 supported by robust wage growth.
  - Continued contractions in investment activities in 2024.
  - 2025 H1: weak growth momentum due to significant uncertainty weighing on sentiment.
  - NGEU-funded investments expected to partly offset moderation in private consumption.

### Deepening twin deficits and recent developments
- Fiscal deficit:
  - Rose to 8.7 percent of GDP (cash basis) in 2024.
  - Large fiscal deficit persisted through mid-2025 despite freeze on public sector wages and pensions in 2025.
  - Drivers: significant increases in pension spending, public wages, and domestically financed public capital expenditure; continued increases in current expenditures.
- Current account deficit:
  - Reached 8.4 percent of GDP (2024).
- Risks to outlook:
  - Downside risks to growth and upside risks to inflation.
  - Sovereign credit rating downgrade risk due to concerns about execution of planned fiscal consolidation for 2025-26 and medium-term sustainability.
  - External risks: slower growth among major trading partners, higher trade barriers, uncertainty, intensification of regional conflicts reducing trade and FDI.
  - Upside inflation risks: higher energy prices, adverse climate shocks affecting food prices, stronger-than-expected wage growth that could delay normalization of core inflation.
  - Upside scenario: strong fiscal adjustment and EU-funded investment implementation could improve investor sentiment and lower risk premia, boosting private investment and growth.

### Fiscal policy: consolidation, projections, and recommendations
- 2025–26 reform package:
  - Welcome step including tax reforms (raising the standard and reduced VAT rates) and continued freeze on public sector wages and pensions in 2026.
  - If fully executed, expected to reduce the primary fiscal deficits by about 1¼ and 2 percentage points of GDP in 2025 and 2026, respectively.
  - Narrow overall fiscal deficit to about 6 percent of GDP in 2026 (if fully executed).
- Medium-term projections and needs:
  - 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.
  - 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.
  - Upfront specification of concrete measures effective from 2027 recommended to restore credibility and increase predictability of tax policy.
- Tax policy and revenue mobilization:
  - Romania’s tax revenue as a share of GDP is among the lowest in the EU.
  - Recommendation: a tax reform package to mobilize revenues and improve fairness, while strengthening work incentives and remaining attractive to capital investment.
- Public investment and fiscal governance:
  - Need to make full use of available EU funds.
  - Enhance public investment management by strengthening coordination and monitoring to support planning, allocation, and implementation.
  - Continue prudence with wage and pension policies beyond 2026.
  - 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.
  - Digitalization: planned introduction of a new digital budgeting platform is positive; ongoing digitalization can strengthen tax administration and public service provision.

### Monetary policy and exchange rate stance
- Recommendation: NBR’s cautious approach remains appropriate.
- Policy rate guidance:
  - 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.
  - NBR should stand ready to adjust the policy rate based on prevailing economic conditions and price dynamics.
- Exchange rate:
  - Greater two-way exchange rate flexibility over the medium term recommended to enhance resilience to shocks.
  - 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.
  - Clear communication accompanying exchange rate flexibility emphasized.

### Financial sector stability and supervision
- Banking system resilience:
  - Banks remain well capitalized and liquid.
  - NBR guidelines to retain profits combined with increased countercyclical capital buffer (CCyB) have bolstered capital and releasable buffers.
  - Asset quality overall remains healthy, with the NPL ratio close to the EU average.
- Emerging vulnerabilities and supervisory priorities:
  - Monitor asset quality and stress-test liquidity amid growing sovereign exposure, buoyant consumer credit growth, and sizable unhedged FX loans.
  - NBR’s effort to expand eligible collaterals according to risk-based haircut criteria is welcome and will strengthen the emergency liquidity assistance scheme.
  - Authorities should be prepared to recalibrate macroprudential policies to align with evolving risks and ensure enhanced resilience.

### Structural reforms to boost growth potential
- Key reform priorities:
  - Strengthen efficiency of the state to make full use of EU funds and support growth amid fiscal adjustment.
  - 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.
  - Improve predictability and quality of regulations to enhance the business climate and reduce informality.
  - Increase labor force participation and productivity through better availability of childcare and investment in education quality in response to an aging population.
- Energy transition and climate policy:
  - 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).
  - 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.
  - A fully integrated and interconnected energy market within an EU-wide Energy Union remains crucial.

*International Monetary Fund staff concluding statement (Romania: Staff Concluding Statement of the 2025 Article IV Mission).*

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## References

- [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)

_Source: https://www.imf.org/en/news/articles/2025/09/12/cs-romania-staff-concluding-statement-of-the-2025-article-iv-mission_