Romania

Romania is a high-income country in Southeast and Central Europe, with a population of 19 million as of 2025. It has been a member of the European Union since 2007 and shares borders with five countries: Bulgaria, Hungary, Moldova, Serbia, and Ukraine.

Romania’s growth momentum has stalled with annual GDP growth below 1% in the past two years, while poverty and inequality remain among the highest in the EU, with wide inter-regional gaps. Moreover, renewed convergence drivers have yet to take hold. Total factor productivity growth, the former engine of convergence toward the EU average income level, has decelerated as gains from the reallocation of production factors between sectors waned, while structural and institutional constraints to allocative efficiency, research and development intensity, and wage-productivity alignment remain binding. A shrinking workforce and brain drain compound these supply-side pressures.

A prolonged period of pro-cyclical fiscal policy has left Romania with widened fiscal and external deficits that, as recent economic developments show, have amplified the exposure to energy shocks, driving inflationary pressures and depressing growth.

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Romania’s economy contracted 0.7% year-on-year in the first half of 2026, driven by private consumption compression as energy sector-driven inflation and a public wage and pension freeze compressed household purchasing power. Investment provided a partial offset, underpinned by EU-funded infrastructure spending front-loaded ahead of the National Recovery and Resilience Plan closure.

Inflation has remained elevated in the first half of 2026 driven mainly by the energy price shock, reflecting weather-induced electricity grid imbalances and international oil market volatility. The National Bank of Romania has maintained tight financial conditions with the policy rate steady amid a negative output gap.

The outlook is based on a return to political stability, continued reforms, and a commitment to a credible fiscal consolidation path. Growth is projected to rebound toward potential, driven by continued structural and fiscal reforms resulting in favorable financial conditions; and improved institutional capacity to absorb the EU structural funds envelope that supports both reforms and public investments. Downside risks to the outlook remain significant. Prolonged political instability would delay reform implementation and jeopardize EU fund disbursements and absorption. Poverty outcomes are expected to improve only gradually over the medium term. As growth is restored and inflation moderates, real incomes are expected to recover, supporting household welfare.

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The Country Partnership Framework (CPF) for Romania (FY25–FY29) aims to promote prosperity and reduce inequality in a livable Romania. It focuses on three strategic objectives: improving human capital outcomes, creating better jobs in a more competitive economy by unlocking private capital, and increasing resilience while accelerating the green transition. These objectives are anchored in a cross-cutting theme of strengthening public institutions to serve people and businesses better.

To achieve these objectives, the World Bank Group’s activities in Romania include lending through both the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC), as well as providing advisory services and analytics (ASA).

The IBRD portfolio comprises 11 active projects with total net commitments of $3.32 billion. Key sectors include:

• Fiscal Policy and Growth – $1.3 billion
• Urban, Subnational Finance, Tourism, and Disaster Management – $884 million
• Health – $557million
• Finance, Competitiveness, and Innovation – $403 million
• Governance – $110 million
• Environment – $64 million

Since 1991, IFC has invested over $19 billion in Romania, supporting landmark privatizations in banking, utilities, and the real sector, as well as pioneering first-of-their-kind, innovative investments across multiple industries. Over the past eight years, IFC’s portfolio in Romania has grown more than five times, from $0.48 billion in 2018 to $2.5 billion today.

Advisory Services and Analytics (ASA) include both World Bank-financed and externally funded activities, such as reimbursable advisory services (RAS) and Trust Funds (TF).

A flagship Country Jobs and Growth Report (CJGR) will be finalized in FY27 to inform policies about Romania’s aging population, productivity challenges and job creation opportunities. The Romania Poverty and Equity Assessment, to be finalized in FY27, will inform the Government’s poverty reduction efforts by providing an in-depth analysis of poverty, inequality, and vulnerability in Romania.

The Romania RAS portfolio comprises 25 active RAS agreements under implementation, including 23 agreements with a total value of USD 103.55 million. The World Bank supports institutional capacity and implementation of EU and national priorities across sectors including pensions, education, social protection, tax, energy, and digitalization. Nine active EU trust funded projects further advance work on governance, human development, disaster risk management, energy, climate, the business environment, and procurement.

The TFs currently include 9 active tasks of which seven are EU-funded. These programs support governance, human development, disaster risk management, energy, climate change, business environment, and procurement.

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The Romania Country Partnership Framework (CPF) for FY2025-FY2029 aims to revitalize the country’s growth model, increase productivity, and enhance its ability to respond to global challenges, including climate change. The strategy focuses on making an impact in three main areas: expanding access to education, healthcare, and social services, focusing on the underserved; unlocking private capital to create better jobs and a more dynamic business environment; and strengthening capacity to prevent and respond to external shocks, while enabling the energy transition.

As the World Bank Group evolves, it remains a committed and strategic partner to Romania, supporting the country in accelerating its national development efforts while contributing to the broader global development agenda. The CPF is designed to harness these opportunities fully.

This CPF emphasizes closing key development gaps, reducing disparities, and strengthening institutions. It also promotes a unified One World Bank Group approach, leveraging the tools and efforts of the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) to amplify its impact. Romania’s status as a high-income country enables the generation of knowledge and solutions that can be replicated globally to address national, regional, and international challenges.

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