World Bank forecasts economic growth of 1.3% for Romania in 2025

  The World Bank estimates a slowing down of growth in the developing economies in Europe and Central Asia (ECA) at 2.5% in 2025 – 2026, for Romania being 1.2% in 2025 and 1.9% in 2026 according to the ECA Report Economic Update for the region, published on Wednesday.Economic growth in developing economies in the Europe and Central Asia region (ECA) is likely to slow, according to the World Bank's ECA Economic Update report for the region, published today Wednesday. Growth in the ECA region is now estimated at 2.5% for the period 2025-26, due to weaker external demand and slowdown in Russia, the WB said in a statement. According to the quoted source, in 2024 growth in the region was established at 3.6% supported by private consumption and robust growth of real salaries, higher remittances and growth in consumer credit, all of which offset weaker external demand due to low growth in the European Union.Higher growth of prices in food and services led to higher inflation which reached 5% at the level of February 2025, from 3.6% at half 2024. The recent growth of inflation determined more central banks increase the monetary policy rates or delay supplementary relaxation.'Although countries in the Europe and Central Asia region managed to maintain steady growth last year, global uncertainty, geo-economic fragmentation and weak expansion among key trading partners are making it more difficult to sustain this growth. To achieve stronger economic expansion in the longer term, it is essential that countries in the region accelerate domestic structural reforms that favour a dynamic and innovative private sector, entrepreneurship and technology adoption,' said Antonella Bassani, World Bank Vice President for Europe and Central Asia, quoted in the statement. Central Asia will probably remain the sub-region with the quickest growth this year and next year, although growth is estimated to be reduced at 4.7% in 2025 – 2026. Slowing down is due to weaker expansion of the oil sector in Kazakhstan, as well as due to the reduction of exports and normalization of remittances flows, says the WB report.In Southern Caucasus, growth is estimated at 3.5% on average, lin 2025 – 2026 as the indirect effects of trade intermediation, labour and capital flows continue to decline.Uncertainty of the trade policy, increased trade barriers and indirect effects of supply chains in the euro zone are estimated to temper recoveries in other areas of the region. Growth in Western Balkans is expected to be moderated at 3.4% in 2025 – 2026 while Central Europe  should be improved only slightly at 2.7%.In Russia, growth is projected to fall to 1.3 per cent in 2025-2026. In Turkey, growth is likely to improve modestly to 3.3 per cent over this period, although it will remain below its long-term trend, owing to continued weak external demand and continued economic recovery. Growth in Ukraine is likely to fall to 2% in 2025.In an analysis dedicated to acceleration of growth in the current challenging global context, the report mentions the importance of dynamic private sector. Countries should invest more in innovation, choose reforms to support young companies, deepen financial markets and increase investment in research and development (R&D) while continuing to focus on integrating global technology, expertise and capital. In order for countries with middle incomes in the region to reach the status of countries with high income, their economies must become more dynamic. The countries which reached successfully the status of economies with high income did that through entrepreneurship dynamism and innovation and had to keep growth through technology capitalization, expertise and capital to increase productivity within companies, says the quoted source.'Business innovation and experimentation are essential for productivity growth and a prerequisite for achieving and maintaining high-income economy status. Middle-income countries in the region can achieve high-income status if firms grow, innovate and compete. While each country needs its own approach to restart growth, incentivising innovation and facilitating business dynamism are crucial,' said Ivailo Izvorski, the World Bank's chief economist for Europe and Central Asia.   The report shows the need to invest in young and innovative companies rather than in the entire small and medium-sized enterprise (SME) sector, as these companies create jobs. This approach should be supported by improving access to finance, especially long-term and venture capital. The region is underfunded as venture capital and equity finance remain underdeveloped. 'Stimulating competition is essential to allow dynamic firms to emerge. The region has too many small, low-productivity small businesses and few large companies outside state-owned enterprises that often dominate markets and stifle entrepreneurial dynamism. Policies that encourage business innovation and technology adoption, such as larger and better targeted R&D incentives, are also needed to help firms become more productive and innovative. Many firms in the region currently rely on reallocating resources and operate as production facilities for foreign companies, rather than developing their own technologies,' the statement added. Finally, investment in human capital is essential for drawing and keeping highly-qualified employees and entrepreneurs as well as for the creation of opportunities for improvement of skills through professional training.