• Recent developments in Romania’s macroeconomic indicators express that the national economy reached a low point in the second quarter of the current year, amid a high level of uncertainty stemming from the tense domestic political climate and multiple global conflicts (military, trade, technological).
• Thus, in May 2025, foreign direct investment (FDI) flows presented their sharpest decline since March 2020, the month of the onset of the coronavirus pandemic, according to statistics from the National Bank of Romania (NBR), as illustrated in the right-hand chart
• Overall, in the first five months of 2025 foreign direct investments declined at an annual rate of approximately 30%, a trend driven by the elevated level of uncertainty (given the internal political tensions), as well as by challenges related to domestic macroeconomic balance (particularly the critical state of public finances).
• On the other hand, the most recent macroeconomic data also indicate that the domestic economy has begun a process of adjustment of the twin deficits, a development positively contributing to investors’ confidence (foreign and domestic).
• In this context, the trade balance in goods and services improved in May 2025 (for the first time in 18 months), with the deficit adjusting by an annual rate of 9.0% to EUR 1.8bn, according to data published by the central bank. This trend was also influenced by the depreciation of the national currency.
• Notably, the trade deficit in goods narrowed in May at the fastest annual pace since January 2024, by 3.6%, to EUR 2.8bn, according to NBR statistics. Meanwhile, the trade surplus in services increased by 8.0% Y/Y to EUR 1bn in May of the current year.
• Additionally, the new Administration recently announced the implementation of fiscal consolidation measures, with a focus on improving the efficiency of public spending— a positive signal for investors’ confidence, as also reflected by the decline of financing costs over the past few weeks.
• Furthermore, it is important to highlight the improvement in industrial production in May, with this key sector (the main engine of the economy from the aggregate supply perspective) increasing by 7.1% Y/Y, the strongest performance since April 2024, according to data from the National Institute of Statistics (NIS).
• Particularly noteworthy is the 11.3% Y/Y increase in the production of capital goods in May 2025, the highest rate since April 2024. This signals positive prospects for productive investment in the near future, following a rebound in gross fixed capital formation in the first quarter, which recorded an annual growth of 5.9%, the best performance since Q1 2024, according to Eurostat estimates.
• Our econometric estimates indicate that Romania’s industrial production has outpaced the trend component in seven of the past eight months, suggesting that the industry is heading into a new cycle following the declines experienced in 2023, 2024, and the first five months of 2025.
• Our view: in our recently revised macroeconomic outlook the Romanian economy could grow by more than 1% in 2025, a scenario that hinges on the continuation of the positive momentum in international financial markets and the effective implementation of the recently announced fiscal consolidation measures. This outlook is supported by the renewed momentum in productive investment, with gross fixed capital formation potentially increasing by over 5% in 2025, after the decline in 2024 (the steepest annual contraction since 2013), a development also underpinned by the implementation of EU-level measures introduced earlier this year | POSITIVE
