Flash estimates show Romania’s GDP dropped 1.9% in real terms in the fourth quarter of 2025 compared with the previous quarter and only rose 0.1% year over year, well below market expectations of a 0.3% decline quarter to quarter and 1.3% growth year-on-year.
Given that both the third and fourth quarters of 2025 now show quarterly contractions, Romania meets the definition of a technical recession.
Full-year GDP growth for 2025 came in at 0.6%, down from the 0.9% of 2024.
Erste expects the demand side breakdown to reveal weak household consumption affected by the fiscal measures, broadly neutral net exports, and most likely a disappointing performance in fixed investment, consistent with the softening seen in the quarterly GDP profile.
Net exports are likely to remain broadly neutral for overall economic growth.
INS will publish the detailed breakdown of GDP growth on March 6, which should provide more insights into the drivers behind this weaker than expected performance and help identify the sectors responsible for the disappointing outcome.
Household consumption is likely to remain subdued through the first half of the year, reflecting still tight financial conditions and lingering real-income pressures. By contrast, Erste expects investment activity to accelerate, supported by the substantial EU funds available to Romania in 2026.
“The government appears committed to maximizing the absorption of these resources, which should provide a meaningful boost to capital formation and partially offset the softness in private demand,” Erste says in its report.
(English version by Loredana Fratila-Cristescu)