As we move through 2026, I am sharing this edition of our quarterly briefing at a moment when the economic l environment has become considerably more complex than most forecasters anticipated months ago.
Navigating headwinds: energy shock, limited fiscal space and government change
Five developments demand your attention at national level:
– deteriorated growth economic outlook for 2026,
– the late but finally approved state budget,
– a structurally constrained fiscal position that limits the government’s room to respond to the current energy shock,
– an oil price spike that is reshaping inflation expectations,
– and, above all, a change of government that brings extra uncertainty.
The confluence of these factors will have direct implications for investment decisions, cost structures, and liquidity planning across all sectors.
Global economic outlook
The IMF’s April 2026 World Economic Outlook, Global Economy in the Shadow of War, opens with a stark message: the momentum building at end-2025 has been halted. The closure of the Strait of Hormuz and damage to critical energy infrastructure in the Middle East have upended earlier projections. Under the reference forecast, which assumes a short-lived conflict and a moderate rise in energy commodity prices, global growth is now projected at 3.1% in 2026, with headline inflation at 4.4%, a sharp reversal of the global disinflation trend. Downside risks remain elevated, with adverse scenarios pointing to growth as low as 2%.
Romania’s growth outlook for 2026 has deteriorated
The IMF now projects GDP growth of 0.7% in 2026, down from 1.4% forecast in October 2025. The downgrade reflects a combination of persistent fiscal pressures, one of the EU’s highest budget deficits, and significant exposure to the ongoing energy shock.
An important question is what lies behind the economic growth slowdown in recent years. Two structural factors are at work:
– The first is a competitiveness deficit that predates the current cycle visible since 2023 but building for longer. It became increasingly apparent as the growth trajectory decelerated starting 2022.
– The second factor is fiscal consolidation measures, including the VAT increase from 19% to 21% in August 2025, the wage and pension freeze, and tightened public spending, compressed household consumption precisely when it was already under pressure from elevated inflation. This is a correction that, whatever its long-term necessity, exerts a contractionary force on near-term demand.
Price pressures in Romania show no quick relief, with inflation forecast at 7.8% in 2026, among the highest in the EU, before declining to 3.9% in 2027. Energy price pass-through, and an unfavorable base effect all contribute to keeping inflation well above target in the near term, narrowing the room for monetary easing and complicating fiscal consolidation efforts. But these forecasts don’t factor in the recent change of government.
A budget finally approved three months later followed by government dismissaltion: credibility regained
Romania’s 2026 state budget was adopted and published in the Official Gazette at the end of March, with a record delay of more than three months past the legal deadline. The path to approval exposed deep fault lines within the four-party governing coalition. During the weeks of parliamentary debates, Romania’s debt management was forced to cancel consecutive bond auctions as market volatility from the Iran conflict compounded domestic uncertainty.
The approved budget targets a cash deficit of 6.2% of GDP in 2026, down from 7.65% in 2025 and 9.3% in 2024. The medium-term path envisions a reduction to around 3.2% by 2029, a trajectory that the Fiscal Council assessed as consistent, but implementation-dependent and subject to significant political risk in each successive year. The budget also projects record public investment, largely anchored in EU cohesion funds and NRRP disbursements. With the Resilience Facility expiring at end 2026, the transition to cohesion policy financing will be a critical test of administrative absorption capacity.
S&P Global affirmed Romania’s BBB- sovereign rating and maintained its negative outlook at the begging of April, projecting a gradual fiscal consolidation path. S&P acknowledged that the measures securing this year’s consolidation are already enacted, but flagged implementation risks such as legal challenges to budget provisions, persistent weaknesses in tax collection, and the absence of specified consolidation measures beyond 2026 as the primary vulnerabilities.
Budget out of the way, the government was dismissed with a no confidence motion in early May, adding further uncertainty to an already volatile context. The first effect was the EUR/RON exchange rate reaching an all-time high of 5.268 on May 6. Further depreciation of the national currency could fuel new inflationary pressure.
New disbursements of EU funds, the budget deficit target, financing costs for the state and companies and sovereign rating are some of the major macroeconomic components that could potentially be impacted by delays in forming a new government.
The oil shock of 2026
The closure of the Strait of Hormuz on 4 March 2026 triggered what the International Energy Agency (IEA) has described as the largest supply disruption in the history of the global oil market. Brent crude surged past USD120 per barrel in mid-March, near its 2008 record, before settling around USD100 as of early May.
Two months since the start of the conflict, the situation in the region (and on the energy market) remains volatile after a cease fire agreed by the US and Iran has failed to re-open traffic through the Strait of Hormuz. Across Europe and the world, the rise in energy prices determined unprecedented measures from governments: cutting VAT and excises for fuels or capping fuel prices to avoid an energy and economic crisis.
For Romania, the consequences are direct and layered. Fuel prices at the pump rose by approximately 20% in March compared to February – a sharp increase that will take time to absorb regardless of policy intervention. The government has tried to limit the pass-through of the global oil shock to domestic consumers and the overall economy introducing: targeted support for the transport and agriculture sectors, both of which carry disproportionate fuel cost exposure and together represent a significant share of Romania’s employment and export base, capped commercial markups, reduction of excise duty on diesel and a solidarity levy on companies producing oil in Romania. However, although prices at the pump went down slightly from their peak in March, they remain 10-15% above pre-crisis levels.
Romania, just one step away from OECD membership, but there is still room for progress
The latest OECD Economic Survey on Romania, released in March 2026, acknowledges the country’s progress in aligning to the organization’s standards over the last two years. The report also includes several specific recommendations for Romania on tax policy that highlight areas that still need improvement, such as:
– Broadening the tax base and strengthening tax collection with digitalisation and risk-based auditing;
– Aligning self-employed contribution rateswith those for employees;
– Making the overall PIT gradually more progressive over the medium-term;
– Applying the standard VAT rate more uniformlyand phasing out reduced rates;
– Moving property taxes to market-value-based taxationand increasing rates;
– Phasing out fossil fuel subsidies, increasing excise duties, phasing out energy price caps on gas;
– Increasing taxation of investment income (capital gains, rents, interest, and royalties) to 16%;
– Phasing out the turnover tax on large companies and eliminatingthe banking sector tax.
The authorities have already implemented some of these measures.Tax digitalisation (e-Invoicing, SAF-T, e-VAT) is genuine progress that reduces compliance gaps. Eliminating the distortionary turnover tax on large companies and the banking sector tax is essential, as is broadening tax bases rather than simply raising rates. The new 10% R&D tax credit sends a positive investment signal.
However, implementing some of these recommendations demands calibration. For example, Romania’s labour tax burden already exceeds the OECD average – 42.8% versus 34.9% for a single worker. Making PIT more progressive without capping social contributions risks undermining competitiveness for high-value investment, particularly in technology and innovation hubs. Raising investment income taxation to 16% could dampen capital formation without offsetting measures. Phasing out reduced VAT rates must account for sectors critical to employment and exports. Also, increasing taxation of the self-employedmust be implemented in a way that does not crush genuine entrepreneurship.
The past two decades prove what this country can achieve, but the easy gains are behind us. Romania’s low-tax growth model has peaked. Public spending ambitions require modernised revenue structures. Future progress depends on predictable, transparent policies shaped through genuine business-government collaboration.
Romania rises to Top 10 European investment destinations – PwC CEO Survey
Romania has advanced from 13th to 9th place among European investment destinations and from 33rd to 28th globally, according to PwC’s 2026 Global CEO Survey. Cumulative FDI doubled between 2014 and 2024, reaching 125 billion euros, with capital inflows recovering strongly to over 8 billion euros last year.
Key investment sectors include manufacturing, engineering & construction, retail, business services, and banking. Notably, technology remains underrepresented despite Romania’s strong IT talent pool. European investors, particularly from Poland, Germany, Austria, and Italy, dominate inflows.
However, challenges persist: bureaucracy, regulatory unpredictability, fiscal burden, and infrastructure gaps weaken competitiveness. Workforce availability is the sole area perceived as competitive.
Here you find the full report CEO Survey 2026 for Romania.
PwC AI Performance study: Only one in five companies see significant AI-driven returns
The top 20% organizations that are most advanced in using artificial intelligence (AI) get almost three quarters (74%) of the value generated by AI, according to PwC’s AI Performance survey. What separates these AI leaders from the rest is what we’ve come to define as “AI fitness” – the ability to point artificial intelligence at what matters, build fit-for-purpose foundations, and hardwire AI throughout the enterprise.
The most AI-fit companies in our research deliver AI-driven financial performance that’s 7.2x as high as the other respondents’ performance. High levels of AI fitness improve a broad set of intermediate performance outcomes – speed of developing new products and services, improved decision-making and enhanced customer experience – that influence companies’ financial results.
Here you find the full report.
WTO moratorium on customs duty on electronic transmissions expires
The World Trade Organization’s long-standing ban on customs duties on electronic transmissions has expired, after members failed to secure an extension at 14th Ministerial Conference in Cameroon in March. This marks a significant turning point for global digital trade as the moratorium provided a stable and predictable (duty free) trading environment for cross border electronic transmissions. Imposing customs duties in the future would lead to more fragmentation, increased business and compliance costs, and potential losses in competitiveness.
Meanwhile, 66 WTO members, representing approximately 70% of global trade, agreed at to move forward with interim implementation of the plurilateral Agreement on Electronic Commerce. This includes a commitment among participating members to not impose customs duties on electronic transmissions, alongside rules on digital trade facilitation, online consumer protection, e-payments, data protection, and cybersecurity.
