A complicated period is ahead for Romania. “We ended up borrowing 1 billion euros a week to pay salaries, pensions and other public expenses”

26293 readings

Romania’s economy is going through a difficult period, marked by high inflation, economic stagnation and a decrease in purchasing power, warns economic analyst Adrian Negrescu.

He declared for Newsweek Romania that the country is in “economic withdrawal” after years of consumption growth being artificially propped up by loan-financed pay rises and pensions.

Romania had the highest annual inflation rate in the European Union in April. Prices increased by 9.5% annually in our country. For comparison, inflation in the EU rose to 3.2%, and that of the euro zone to 3%, the data show Eurostat.

The situation does not seem to be improving any time soon. Romania’s economy is expected to enter stagnation in 2026, after a growth of only 0.7% in 2025, to recover only in 2027, when the advance GDP it would reach 2.3%, the quoted source says.

“Romania is in a zone of economic withdrawal. After years of growing due to the steroids provided by the WLG (Wage led growth) policy, through which the state increased salaries and pensions out of pen in order to stimulate consumption, the moment this economically bankrupt policy stopped, the economy began to suffer. What did we choose from this derivative of Keynesian policies to stimulate consumption?

With a huge public debt, we ended up borrowing 1 billion euros/week to have something to pay salaries, pensions and other public expenses, and with an unbalanced economy in which the drop in consumption led a large part of the companies that depended on trade to the zone of economic withdrawal”, explained Adrian Negrescu.

The economic crisis would close thousands of companies

The analyst says that the good news is that we have not entered into an economic crisis.

“The good news is that Romania’s level of economic resilience is unexpectedly good, proof that we have not entered a major economic crisis, we are actually experiencing a kind of stagflation (zero economic growth and high inflation).

If we were in an economic crisis, we saw a shutdown of business, we saw tens of thousands of companies closing due to lack of orders, we saw hundreds of thousands of people without jobs and, if you remember, we saw tens of thousands of people unable to pay their installments, as happened in 2010 when the moratorium was needed to postpone the payment of installments.

Essentially, we go through it recession quite soft, with an economic contraction of only 0.2% in the first quarter and chances of ending the year afloat. CE estimates an advance of 0.2%, in fact this means economic stagnation”, said Adrian Negrescu.

However, the analyst warns that the difficult period we are going through will not end very soon. He says measures taken by the former governing coalition should continue and taxes should be collected more effectively.

“Romania must enter a stage of precision social protection. The money saved by the state must be redirected surgically, exclusively to the truly vulnerable citizens. This approach makes social assistance more efficient and allows the use of savings to accelerate the reduction of the budget deficit,” Adrian Negrescu explained.