Romania’s economy contracted by 0.4% year on year in the second quarter of 2026 (chart), narrowing from a 1.2% decline in the first quarter, with GDP down 0.7% in the first half of the year, according to preliminary data published by the National Institute of Statistics (INS) on September 7. The figures confirmed the flash estimate released in August.

Under the Eurostat methodology, based on chain-linked volumes, GDP contracted by 1.9% year on year in Q2, following a 1.4% decline in Q1. In seasonally adjusted terms, however, economic activity remained broadly unchanged in both quarters. GDP fell 1.6% year on year in H1 under the Eurostat methodology.

The difference between the two measures reflects their different price bases. The Eurostat chain-linked volume measure is more relevant for assessing the full-year performance.

Construction was the only major sector to make a substantial positive contribution to Q2 and H1 economic activity (chart). Construction output increased by 15.3% year on year in Q2 and 12.3% in H1, contributing 0.9 percentage points and 0.7pp to GDP growth, respectively, partly offsetting declines in industry and most services.

Financial intermediation, business-to-business services and particularly cultural services (the latter with a small contribution to the overall GDP, though) were among the other sectors making small positive contributions. Agriculture also made a small contribution, although its weight in first-half GDP is limited.

On the demand side (chart), gross fixed capital formation rose 12.7% year on year in Q2 and 10.9% in H1, while household consumption declined 1% in both periods. Domestic demand returned to annual growth in Q2 after contracting in the previous two quarters, but the increase on the downside generated a wider net-import component (5.6% of total domestic demand in Q2 this year from 5,3% in Q2 last year and under 5% in the previous two quarters).

Erste Group has revised its full-year GDP forecast to a 0.7% contraction, from its previous forecast of a 0.3% decline. “The adjustment reflects somewhat underwhelming developments in the first half of the year,” Erste said.

The bank expects consumption to remain weak in 2026 as elevated inflation keeps real wage growth negative, although some relief could emerge in H2. Investment is expected to remain strong, particularly in Q3, supported by EU funding, while net exports are forecast to weigh on growth.

For 2027, Erste expects Romania’s economy to return towards potential growth, forecasting GDP expansion of 2.2%.