Romania's purchasing power plummets amid soaring inflation and falling incomes

Romanians are experiencing a sharp decline in their purchasing power, as inflation hit 10.9% in May and electricity prices surged by over 55% in the past year. These economic pressures are compounded by a decrease in the average net salary in April and a fall in the average pension during the first quarter of 2026, painting a grim picture for household finances.

Economists Radu Nechita and Adrian Negrescu highlight the visible impact on consumer spending. They caution that the coming months will be critical for the Romanian economy. Nechita suggests that the government's room for maneuver is significantly constrained by the current budgetary situation and political landscape. He posits two potential paths forward: either the government implements unpopular but necessary spending cuts and public sector reforms, or it continues with wasteful policies that have contributed to the current crisis.

“

We will manage with more difficulty because the room for maneuver of the future government, whoever it may be, is more reduced than most politicians and voters declare and seem to believe.

The "difficult crossing" scenario, involving austerity measures, could lead to healthy economic growth within one to two years, leveraging past sacrifices for future credibility and foreign investment. Conversely, a return to "free money" policies and deficit spending would likely result in a collapse of credibility and a drying up of external funding sources. This would amplify Romania's structural issues, particularly its inability to finance its oversized expenditures, potentially triggering an excessive deficit procedure by the European Union.

“

We will manage with more difficulty because the room for maneuver of the future government, whoever it may be, is more reduced than most politicians and voters declare and seem to believe. Either we have a government that continues reforms with the less popular aspects, i.e., through public spending cuts, including the number of public sector employees (i.e. what the recently overthrown government declared it intended), or we will have a government that mimics reforms or even comes with the same wasteful public money policies that brought us to this situation.