Romania

Romania is a high-income country in Central Europe, with a population exceeding 19 million as of 2024. It has been a member of the European Union since 2007 and shares borders with five countries: Bulgaria, Hungary, Moldova, Serbia, and Ukraine.

Romania has advanced EU convergence. However, growth has recently lost momentum as structural bottlenecks weigh productivity, competitiveness, and the inclusiveness of growth. Key constraints include weak governance and regulatory unpredictability that suppress investment, skills mismatches, and underdeveloped capital markets that misallocate labor and capital, and limited firm-level innovation capacity hindering the transition to higher value-added growth. Pro-cyclical fiscal policy widened twin (fiscal and external) deficits, amplifying structural weaknesses, and raising macro-financial risks.

In 2025, growth slowed markedly, reflecting a sharp deceleration in private consumption, partially cushioned by investment, boosted by record-high public expenditure, more than half of which was EU-funded. The near-term outlook remains challenging, clouded by vulnerability to external shocks and heightened geopolitical uncertainty, which amplify downside risks.

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Growth slowed to 0.7% in 2025, with output turning negative in the second half of the year. EU-funded investment cushioned the deceleration, though growth remained uneven, with construction outperforming on the back of a cyclical surge in EU-funded infrastructure, while industry contracting under rising energy costs and competitiveness pressures.

Inflation accelerated in the second half of 2025, driven largely by electricity prices. The National Bank of Romania held the policy rate steady amid persistent inflationary pressures, while private credit slowed, with companies increasingly borrowing in foreign currency as high local lending rates made leu-denominated loans less attractive.

The conflict in the Middle East poses additional inflationary pressures and weighs on growth, with private consumption and industry most exposed through real income erosion and energy cost pass-through. The Government's recently adopted recovery package helps offset some of this drag, as it aims to strengthen investment and competitiveness through strategic financing and tax incentives. Poverty reduction is expected to slow over the short to medium term, as weaker growth, fiscal tightening, and inflationary pressures pose risks to household welfare, particularly for low-income and energy-poor groups.

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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 12 active projects with total net commitments of $3.83 billion. Key sectors include: macroeconomic and fiscal management: $1.3 billion, health: $1.07 billion, urban/resilience: $880 million, finance, competitiveness, and innovation: $403 million, governance: $109.8 million, and environment: $63.6 million.

Since 1991, IFC has invested over $7 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 8 years, IFC’s portfolio in Romania has grown nearly six times, from $0.48 billion in 2018 to $2.7 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 RAS program currently has 23 active tasks totaling $95.45 million. It focuses on strengthening institutional capacity and providing advice on building and implementing EU strategic frameworks and systems to support the achievement of key milestones and targets under Romania’s National Resilience and Recovery Plan (including pensions, education, social protection, tax policy, energy, and digitalization).

The TFs currently include 10 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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