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Erste and ING Predict 2026 Recession for Single-Engine Romania
Romania is navigating its first annual economic contraction since 2020, as fresh macroeconomic assessments from banking groups Erste and ING paint a picture of an economy dependent almost entirely on civil construction and infrastructure investments funded by European Union capital.
Official data released by the National Institute of Statistics (INS) confirms that Romania’s Gross Domestic Product reached RON 1.023 trillion in current prices during the first half of 2026. However, in real terms, the seasonally adjusted series shows a 1.6% contraction compared to the same period in 2025. Unadjusted data indicates a 0.7% year-on-year drop for the first half of the year, following flat quarter-on-quarter growth in the second quarter.
The revised figures have prompted leading banking analysts to downgrade their full-year forecasts for 2026, pointing to persistent weakness in household consumption, manufacturing, and core services.
Erste Group Research revised its 2026 economic outlook downwards, anticipating a real GDP contraction of 0.7%, compared to its previous projection of negative 0.3%. The revision follows weaker-than-expected economic performance during the first half of the year, driven primarily by high inflation eroding purchasing power and keeping real wage growth in negative territory.
From a demand perspective, Gross Fixed Capital Formation served as the sole significant positive driver in the second quarter, contributing 4.1 percentage points to the annual GDP dynamic. In contrast, private consumption exerted a 2.0 percentage point drag on growth, inventory changes subtracted another 2.0 percentage points, and net exports reduced GDP by an additional 0.5 percentage points. Public consumption remained neutral.
On the production side, construction generated the strongest positive contribution to second-quarter GDP at 0.9 percentage points, followed by agriculture at 0.1 percentage points. Conversely, services created a 1.2 percentage point drag, while industrial output reduced GDP by 0.7 percentage points.
Erste analysts expect a modest recovery in private consumption in the second half of 2026 as real income pressures gradually ease, though full-year consumption will likely remain negative. Looking ahead to 2027, Erste projects a recovery toward potential growth, estimating GDP expansion at 2.2%.
An analysis published by ING echoes these concerns, describing Romania as operating as a single-engine economy where infrastructure investment acts as the sole buffer against a deeper downturn. ING maintained its forecast for a 0.5% GDP contraction in 2026, while warning that downside risks remain pronounced.
Banking
ING highlighted the stark imbalance within the economy during the second quarter, noting that investment surged by 16.5% year-on-year, adding 4.1 percentage points to GDP dynamics. Meanwhile, household consumption contracted by 3.1% in real terms, subtracting 1.9 percentage points from growth.
The report emphasized that high-frequency data for July provides no indication of a near-term consumer rebound. Retail sales dropped 6% year-on-year in July and 5.7% over the first seven months of 2026, with declines recorded across non-food items, food and beverages, and automotive fuels. Romania registered the sharpest annual retail sales decline in the European Union for July, running counter to an EU-wide average growth rate of approximately 1%.
Industrial performance also remains subdued, with industrial production declining 3.5% in the first half of the year and manufacturing falling 6% year-on-year in June. ING analysts view this trend as an extension of a multi-year industrial slowdown rather than a temporary disruption.
While ING projects a economic recovery to 2.2% growth in 2027—supported by completed infrastructure projects and potential spillovers from state investments—it warns that political uncertainty, sovereign credit rating pressures, and international energy market volatility pose ongoing risks to the baseline scenario.