Romania ended 2025 with the highest inflation rate in the European Union, almost three times the European average. The National Bank anticipates a sharp decline in the second half of 2026, but analysts warn that prices will not fall; they will simply rise more slowly. Here is what lies ahead for Romanians’ household budgets and for the country’s economy.

(Staff: Romania / Economy & Finance)

Romania is currently facing the highest inflation rate in the European Union, a difficult economic reality that is severely affecting people’s purchasing power. According to Eurostat data, Romania’s annual inflation rate was 9.7% in May 2026, while the European average stood at just 3.3%. The difference was nearly threefold, reflecting much stronger economic pressures on households in Romania.

Why is inflation so high in Romania?

The rise in inflation over the past year and a half can be divided into two distinct periods. In the first part of 2025, the annual rate remained around 5%. The major change came in the summer of 2025, when the electricity price-capping scheme expired, causing consumers’ bills to rise significantly. In August, the effects of the VAT and excise tax increases were also reflected in the prices of many goods and services. The National Bank of Romania estimated that the direct effect of higher electricity prices accounted for approximately 2.3 percentage points of the annual inflation rate, while the increase in indirect taxes accounted for approximately 2 percentage points.

The largest price increases were recorded for services, which became 13.53% more expensive in one year, followed by non-food goods at 12.54% and food products at 6.78%.

What does the National Bank forecast for the future?

The National Bank of Romania (BNR) anticipates a sharp decline in inflation in the second half of 2026, to 5.5%, followed by an even stronger decline by the end of 2027, to 2.9%. According to the August 2026 edition of the Quarterly Inflation Report, BNR forecasts an annual inflation rate of 6.1% for December 2026, followed by a decline to 3.4% at the end of 2027 and 2.8% in the second quarter of 2028.

What is happening to economic growth?

This decline is explained by the base effects associated with the major shocks of 2025 – in other words, prices will not fall, but they will increase more slowly than in the previous year. BNR warns, however, that the balance of risks remains tilted towards upward deviations from the baseline path, with risks including an escalation of geopolitical tensions, a prolonged energy crisis and continued fragmentation of international trade.

Romania’s economy is going through a period of stagnation. After real GDP growth of 0.7% in 2025, the European Commission estimates that the Romanian economy will stagnate in 2026, with growth of only 0.1%, before returning to growth of 2.3% in 2027.

What measures is the government taking?

Private consumption is expected to remain weak until mid-2026, amid moderating wage growth, persistent inflation and the effects of fiscal consolidation on disposable real incomes. At the same time, investment – significantly supported by European funds – is identified as the main engine of growth.

Prime Minister Ilie Bolojan said that inflation will stabilise in the second half of the year, while the effects of the economic contraction will continue to be felt until then. He said that measures such as cutting administrative spending and increasing revenue collection are expected to take effect. The government is also preparing a form of support for people receiving small pensions, included in the draft budget.

What are the risks and challenges ahead?

The interim Finance Minister, Alexandru Nazare, said that the disinflation process could begin in August–September, and that the economy could see a more substantial recovery starting in 2027 if fiscal consolidation, investment and the absorption of European funds continue. The current inflation estimate is 5–6%, rather than 4% under the initial scenario, although the direction remains downward.

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Conclusion

Among the main risks mentioned by analysts are:

• Geopolitical tensions and their impact on energy and fuel prices;
• A prolonged energy crisis and volatility in energy markets;
• Fragmentation of international trade and global economic uncertainty;
• Rising public debt, estimated to reach 63.4% of GDP by 2027;
• The budget deficit, which is expected to fall from 7.9% of GDP in 2025 to 6.2% in 2026 and 5.8% in 2027.

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Romania is going through a difficult period of economic adjustment, marked by the highest inflation in the European Union and stagnating economic growth. The positive outlook is that BNR expects a significant decline in inflation in the second half of 2026 and an economic recovery in 2027. The less positive side is that prices will not fall – they will continue to rise, only more slowly. For Romanians, the coming period will continue to require financial caution, while for the government the challenge will be to balance fiscal consolidation with protecting the most vulnerable.