Citi: Romania heads into 2027 with a shrinking economy and rising prices
Citi Research now expects Romania's GDP to fall by 0.9% in 2026 while raising its year-end inflation forecast to 6.7%, an unusual mix of contraction and persistent price pressure made costlier by political uncertainty.
Romania's economy is shrinking, yet prices keep climbing, according to a report published on Monday by Citi Research. Economists Ilker Domac and Gultekin Isiklar estimate that Romanian GDP will contract by 0.9% in 2026, and they have raised their year-end inflation forecast to 6.7%, 0.7 percentage points above their previous estimate. The report is titled "Economic Adjustment amid Political Uncertainty", a phrase that sums up the bank's view: the fiscal and economic adjustment is under way, but political uncertainty is making it more expensive.
Much of this year's decline was inherited from 2025. In the last quarter of last year the economy contracted by 1.9% compared with the previous quarter, and it then stagnated in the first half of 2026. According to Citi, that starting point alone knocks roughly 1.2 percentage points off 2026 growth, the weakest start to a year since 2012. Private consumption has fallen, investment has only partly compensated, construction recovered in the first half, while agriculture and IT&C performed poorly. Households are cutting first the purchases they can postpone, such as appliances and electronics, while spending on food and medical services is holding up better. The bank's indicators suggest the decline will continue until the end of the year.
Normally, a contracting economy eases pressure on prices, but Romania does not fit that pattern. Annual inflation rose from 6.17% in August to 6.61% in September, and the seasonally adjusted three-month annualised rate accelerated from 3.1% to 4.1%. Citi notes that wages are not the main driver: growth in unit labour costs has slowed significantly. For households and companies, the message is that the squeeze on incomes is likely to last into 2027. Source: HotNews (Citi Research report)