Study: Romania's economic growth from 2022 to 2024 would have been 1.2 percentage points lower without the PNRR

The economic growth of Romania in the period 2022 – 2024 would have been lower by 12 percentage points without the National Plan for Recovery and Resilience (PNRR) shows the publication of the National Bank of Romania, Studies Notebooks no.66 – ‘European Funds and public investments in Romania: implications of finalizing PNRR for the economic growth’.According to the authors, the European funds, both from PNRR and those in the standard multiannual financial framework contributed to mitigate the adverse effects of COVID 19 and facilitate the economic recovery.Empirical analysis indicates that a 1 percentage point increase in GDP from structural and cohesion funds is associated, on average, with a contemporary impact of around 0.5 percentage points on GDP growth, to which subsequent spillover effects are added. At the same time, the results highlight the essential role of the institutional framework: in economies with weak institutions, the impact of European funds is limited, while improving institutional quality significantly amplifies the effects on economic growth, in line with the literature. With regard to the PNRR, by constructing a counterfactual series of GDP for Romania, it was found that in its absence—i.e., the 1.6% of GDP spent—economic growth in the period 2022-2024 would have been reduced by up to 1.2 percentage points, according to the authors of the study.They consider that the public health crisis amplified the existing economic vulnerability both at national level and global level, generating significant socio-economic effects and proving the necessity to consolidate the reaction capacity to future shocks In this context, the European Commission launched the programme Next Generation EU with central pillar the Mechanism for Recovery and Resilience on which basis the National Plans for Recovery and Resilience were created.‘The PNRR implementation was affected by delays, due to the overlapping of major adverse shocks – including widespread price increases caused by disruptions to global supply chains and the war in Ukraine – as well of the limitations regarding the administrative capacity to implement these programmes In Romania these difficulties were reflected in a slow dynamics of investments and reforms, which led to delays in transmitting the payments requests and later, PNRR renegotiation Moreover, due to the conclusion of this programme in August 2026, the revision involved the reduction of the loan component by approximately two percent of the GDP Even so, speaking about funds effectively spent, Romania was at the end of 2024 slightly above other economies in the region, such as Poland, Hungary or the Czeck Republic’ , the study shows The study analyses, at the same time, the macroeconomic perspective associated to the conclusion of PNRR after 2026. On the one hand, in line with the previous CFM experience (the Multiannual Financial Framework) there is the risk of adverse impact on the economic growth through total investments compression, as the private sector has a reduced capacity to compensate and the fiscal space of the public sector is, in its turn, limited.However, the shock of the PNRR's completion is expected to be partially mitigated by the overlap of several factors: the persistence of the effects of projects already implemented, the impact of structural reforms included in the PNRR—aimed at increasing the resilience of the economy—and the launch of alternative investment programs, such as SAFE. In the latter case, the set of estimated multipliers and a priori assumptions—in particular, full absorption—imply a possible cumulative impact on economic growth, including knock-on effects, of 1.4-3.5 percentage points by 2030. However, given the uncertainties surrounding allocations, conditionalities, and the implementation timetable for Romania, the role of the SAFE program is treated with caution, as a potential compensating factor, but not as a baseline assumption in the quantitative scenarios," the study states. At the same time, the authors mention that, by the end of November 2025 Romania drew approximately half of the renegociated PNRR allocation, worth 21.4 billion euro.'Assuming full absorption of the remaining PNRR funds by 2026, i.e. 2.7% of GDP, an impact on economic growth in 2026 of more than 1 percentage point of GDP can be anticipated, given the magnitude of the multipliers estimated in this paper. However, this value should be interpreted with caution, as it may be optimistic in relation to the methodological limitations discussed above. On the other hand, failure to attract PNRR funds would lead either to the suspension/delay of investment projects until alternative sources of financing are identified (e.g., standard CFM or SAFE), or to their implementation from own sources as early as 2026, with a direct and potentially significant impact on the budget deficit. After 2026, the predictable cessation of financial flows associated with the PNRR—whose formal deadline for completing milestones and targets is August 30, 2026 - implies a discontinuity in public investment, with macroeconomic impact, but which is likely to be amortized through several channels, reducing the risk of an 'investment shock' at the end of the PNRR cycle," the document states. The authors of the study are Cristina Anghelescu, Daniel Daianu, Tudor Grosu and David Ortan