Europe's Pitch Book: Romania - The Gifted One

(MENAFN- ING)

Looking at Romania today, optimism is not the obvious reaction. Growth has stalled, inflation is high, the government needs to repair a large fiscal deficit and politics has been unsettled. Still, in many ways Romanians are more optimistic about the future than other Europeans: 49% say 'hope' describes their emotional state (43% for Europe) and 24% expect an increase in their standard of living (18% for Europe). We share this optimism; it's hard to be pessimistic about Romania. Yet all that untapped potential is also a source of frustration.

In the European family, Romania is the gifted one: obviously talented, sometimes brilliant, but often unable to turn ability into consistent achievement. The youngster who could top the class, but rarely hands in all the homework. It has talented people, plentiful energy resources, a sizeable digital economy, fertile land, a strategic location and enormous scope to improve its infrastructure. Few European countries possess such a broad set of opportunities. Romania's problem is not a shortage of ingredients, but turning them into sustained results.

Romania has already shown what it can do

The country's history is relatively brief. In the nineteenth century, Wallachia and Moldavia united to form the basis of modern Romania. The new state turned to Western Europe for its ruler, choosing a German aristocrat who arrived as prince in 1866 and became King Carol I in 1881. He inherited a country with considerable potential, but weak institutions and underdeveloped infrastructure.

The priority was to build and connect: new buildings, railways and stronger links with the rest of Europe. In many ways, it was the beginning of a challenge that Romania is still grappling with today: how to turn its natural advantages into a successful modern European economy.

But let's start by acknowledging how much Romania has already achieved. At the start of this century, Romanian living standards were far below those in most of the European Union and only half of those in Poland. Romania's catch-up after the end of communism was initially slow. Over the past two decades, however, the country has been one of Europe's strongest convergence stories. GDP per capita in purchasing-power terms has moved from below 30% of the EU average to close to 80%. Its productivity growth has been the highest on the continent, with productivity almost tripling from 2000 to 2024.

Later start, bursts of progress

GDP per capita, adjusted for purchasing power, $000s

Source: World Bank

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EU membership, foreign investment and integration into European supply chains have transformed the economy. Walk around in Bucharest and cars will look nicer than in many other European cities. The Bucharest-Ilfov region ranks seventh in Europe for GDP per capita in purchasing power standards, at 188% of the EU average. While we acknowledge measurement issues, the fact that it ranks ahead of regions such as North Holland (10th), Budapest (12th) and Warsaw (16th) shows just how far Romania's capital has come.

Bucharest is now among Europe's most productive regions

GDP per capita, adjusted for differences in purchasing power, as % of the EU average, 2024

Source: Eurostat

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But Bucharest only tells part of the story. While the capital stands out for the right reasons, other parts of Romania stand out for less positive ones. The regional differences are significant.

Romania's success is unevenly spread

GDP per capita, adjusted for differences in purchasing power, as % of the EU average, 2024

Source: Eurostat

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So Romania has shown it is capable of convergence, but the question is whether it can turn concentrated bursts of progress into a durable and broad-based development model.

Understanding the strengths

Let's give you an overview of what Romania has on offer, starting with people. In 2024, 31% of Romanian students were enrolled in a STEM university programme, above the EU average of 27%. Language skills add to the attractiveness for international companies: Romania ranked 11th globally in the 2025 EF English Proficiency Index, scoring 605, within the“very high proficiency” band. However, tertiary educational attainment among 25-34-year-olds is only around 23%, barely half the EU average, which suggests there is significant room to catch up.

Many talented Romanians no longer live in Romania. About five million were living elsewhere in 2025, mostly in Europe. That is usually described as a Romanian weakness, and with good reason. But the diaspora is also evidence of the country's human potential. It represents skills, capital, experience and networks that can help Romania to connect.

And lastly, Romania has a sizeable untapped labour pool. In 2025, only around 69% of Romanians aged 20-64 were employed, compared with about 76% across the EU, while female employment was just below 60%. Closing even part of that employment gap could help offset the drag from unfavourable demographics.

Then there is energy. Romania has something that many European countries would dearly like to possess: a broad domestic energy base. Its dependence on imported energy was around 30% in 2024, roughly half the EU average – only Estonia, Sweden and Latvia had lower import shares. It produces oil and gas, has hydro and nuclear capacity. The country also has considerable wind potential, both onshore and offshore, as well as good solar capacity, which it is currently ramping up. Romania was the EU's largest natural-gas producer in 2025. With Neptun Deep, which holds an estimated 100 billion cubic metres of natural gas and is expected to start production in 2027, that position will become even stronger.

This is quite a unique starting point, and things are moving in the right direction. But having abundant energy resources and turning them into a competitive advantage are two different things. Romania still requires sizeable investment in electricity transmission, distribution, storage and interconnection. If Romania gets this right, reliable and competitively priced energy can support industry, attract investment and reduce the economy's external vulnerabilities.

Romania's digital economy provides a striking contrast with its image as one of Europe's poorer eastern economies. The country has built some unusually strong digital assets. According to the European Commission's 2026 Digital Decade country report, Romania is an EU leader in fixed connectivity, with fibre reaching 96.3% of households compared with 74.1% across the EU, while its relatively large pipeline of ICT graduates provides a base of specialised talent. There are also signs of greater technological depth: more than €375 million in European funding has been committed to semiconductor projects, including R&D involving NXP, Continental and Bosch, while the new Romanian AI Factory should expand access to advanced computing infrastructure. Yet Romania has been considerably better at creating digital infrastructure and pockets of specialist expertise than at diffusing technology through the wider economy. Only 31.8% of Romanians have basic digital skills, while AI is used by just 5.2% of enterprises compared to 20.0% across the EU. Encouragingly, adoption is accelerating. AI use rose by almost 70% in the latest year, while 35.1% of firms now use data analytics, not far below the EU's 39.9%. Romania's digital upside therefore lies in converting an already substantial technology base into broader productivity gains across firms and society.

And then there is geography. Romania sits on the Black Sea and the Danube, between Central Europe, the Balkans and Ukraine. There is extensive agricultural land and impressive natural beauty. Yet Romania has historically struggled to connect the assets. Transport infrastructure has been inadequate. In Bucharest, between regions and towards the rest of Europe, connections are slower than they should be. However, here we see a silver lining and something is starting to change. Today, over 1,400 kilometres of motorway and express road are already open, another 1,000 kilometres are under construction and roughly 300 kilometres are in the tendering process. Public investment has risen rapidly, and EU funds are financing a sizeable share of the investment programme. New motorways, railways, and ports shorten journeys. This improves day-to-day logistics, but it also widens labour markets, makes poorer regions accessible to investment, and allows companies to integrate more efficiently into European supply chains.

In many ways, Romania combines some of the strengths of Poland and Spain. It can learn from Poland's path of steady convergence and from Spain's success in using infrastructure, energy and natural assets. Romania has the opportunity to draw on both playbooks.

King Carol would recognise Romania's opportunities particularly well.

His answer to Romania's potential was to build – not only did he turn the capital into an eclectic mix of buildings with European-inspired architecture, he also built roads, railroads and ports. Now Romania is building again. Getting the infrastructure right will be key to unlocking future growth.

Untapped financial firepower

All these opportunities require money on the table. We see plenty of options here, once the country has got its fiscal house in order. The government deficit has been too high in recent years, but the country is currently in a phase of fiscal consolidation. We expect the deficit to come down from 9.3% in 2024 to 5.1% in 2027, which is a steady pace of improvement, explaining the current economic stagnation. The country follows the guardrails of Europe's excessive deficit procedure and there is currently no significant political debate about that. The risk of a rating downgrade still exists, but seems to be past the point of maximum danger, as fiscal consolidation has gone from plan to execution. We expect debt-to-GDP to reach 63% next year, a deterioration from the past, but not bad in comparison with many other countries. More importantly, Romania is a low tax-to-GDP country – at 29% it is well below Europe's average of 40% – so the state could gradually improve tax collection in order to be able to fund more investments. Longer term, this could be welfare-enhancing for Romanians.

The private sector could also lift off with a smart dose of leverage. Romanian household debt was only 12% of GDP in 2025, versus an EU average of almost 50%. Mortgage debts are small, while 93% of Romanians own their home – one of the highest rates in Europe. Corporate debt is 27% of GDP, well below the 70% many European countries are at. Corporates rely on their own funds to grow, which provides resilience, but can also constrain growth. There is scope for households to put more of their savings to work, while corporates could benefit from greater access to both bank lending and risk-bearing capital.

Finally, the country has more room to catch up on foreign direct investment. Compared with Poland, the Czech Republic and Hungary, the stock of FDI is low relative to GDP. Combined with European funds, which will continue to be a net inflow for Romania, foreign funding is another potential source of funding for further growth. Romania is not fundamentally short of potential sources of capital. The harder task is creating the conditions that put that capital to productive use.

Plenty of room for more foreign investment

Evolution of FDI, 1995-2025. Stocks, as % of GDP

Source: UNCTAD World Investment Report, IMF WEO, ING calculations

"> The confidence trap

Talking to Romanian business leaders, we know they can sometimes be remarkably pessimistic about Romania. There are plenty of historical reasons for that scepticism. But expectations matter economically. Businesses that do not believe conditions will improve are less likely to make long-term investments. People who left the country are less likely to return. And convincing foreign investors does not come easy for a country so reluctant to sell its own strengths. It can become a self-fulfilling prophecy.

That may be Romania's most intriguing contradiction. The country has already achieved remarkable economic convergence, yet many Romanians still behave as though success is something that happens elsewhere. Romania's increasingly successful business community can help break the cycle, not only by investing but by becoming part of the country's institutional progress and making a more compelling case for Romania abroad.

The upside for the family

Romania's relationship with the rest of the European family is not always easy to read. We would like to clarify: a majority of Romanians – 53% – have a positive image of the European Union, which is slightly above the European average. Three quarters see the EU as a place of stability in a troubled world and a similar share sees EU membership as having been beneficial. Romanians are pragmatic in their relationship with Europe; they see it as a road towards economic opportunity. The pro-Russian sentiment can be politically disruptive, but it represents a small minority rather than an alternative national consensus. Romania's attitude can sometimes be misread but fundamentally, the country remains pro-EU and strongly Atlanticist.

Romania's upside potential makes it an interesting place for pioneers. In that sense, it complements a continent that has matured in many ways. But Romania has more to offer than just that. Europe faces labour and skills shortages; Romania has technical talent and considerable scope to bring more people into work. Europe worries about energy security; Romania has gas, nuclear, hydro and renewables. Europe wants greater digital capacity; Romania has IT skills, and the room and energy for data centres.

Romania's opportunities can provide answers to Europe's weaknesses – strengthening the ties can be beneficial for both sides. Its existing diaspora can help to connect the dots.

That is why Romania gives us good reason to be optimistic about Europe's economic future. Yes, it will be challenging to unlock the country's full potential, but let's not forget that Romania has already closed an extraordinary share of the economic gap with Western Europe. Given how far it has already come, there is good reason to be hopeful about what comes next. Romanians and Europeans alike would do well not to underestimate the gifted one.

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