Economy 3 min read By Arthur Ellington
BCR Research Sees Romanian Economy Shrinking 1% in 2026
Romania's economy is expected to contract by 1% in 2026, before recovering to 1.9% in 2027 and 2.1% in 2028, according to a structural model by BCR Research. Average inflation is expected to fall from 8.4% to 3% by 2028.
Romania's economy will contract by 1% in 2026, after which it is expected to recover, with growth of 1.9% in 2027 and 2.1% in 2028, according to an analysis carried out by BCR Research. The forecast was presented in a special report signed by Vlad Ioniță, who uses a structural model to measure which factors drive the evolution of the economy and inflation.
According to the model, economic growth is mainly determined by domestic factors, which explain approximately 70% of the variation in GDP. External shocks, by contrast, explain roughly half of the variation in inflation. The authors stress that monetary policy has a limited effect on economic growth, explaining less than 2% of the variation in GDP.
A central element of the analysis is the increase in the risk premium in the second quarter of 2026, which reduced annual economic growth by 2.6 percentage points. The model identifies this risk premium shock in 73% of the admissible model specifications for the second quarter of 2026. The electoral episode of May 2025 was not automatically considered a risk premium shock, according to the report.
Average inflation is expected to reach 8.4% in 2026, fall to 4.8% in 2027 and return to 3% in 2028. The forecast for the end of 2027 points to inflation of 3.5%. The analysis shows that a 10% increase in oil prices would lead to price increases of 0.3–0.5% in the first quarters.
The model also estimates the effects of other shocks. A risk premium shock would reduce GDP by approximately 1.2% after one year. A 1% increase in demand from the euro area would bring an additional approximately 1.5% to Romanian GDP after one year. A 100 basis point increase in ROBOR would reduce GDP by approximately 0.8% after one year, according to the same analysis.
Regarding public spending, the estimated multiplier is approximately 0.9 after one year, with a range between 0.4 and 1.5 at a 68% confidence level. The authors draw attention to the high uncertainty of these estimates. The report also specifies that the effects of monetary policy are assumed to have a one-quarter lag, and that an alternative scenario doubles their impact.
The analysis also includes a historical reconstruction. Growth in 2017 was driven by domestic demand and tax cuts. In the fourth quarter of 2019, government expenditure added approximately 1.7 percentage points to growth, while in 2022 external demand was the main support for growth, contributing around 3 percentage points on average.
The authors also note the model's limitations, as it does not include variables on capital flows, the balance sheets of firms and banks, or investor confidence. These elements could influence the results, given that financial risk was the factor that reduced economic growth in the second quarter of 2026.
Source: economedia.ro
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