Romania's Economic Reforms and Market Implications: Assessing Policy Momentum and Its Impact on Foreign Investment Inflows

Romania's economic reforms from 2023 to 2025 have positioned the country as a focal point for foreign direct investment (FDI) in Central and Eastern Europe, despite persistent fiscal and structural challenges. The interplay between policy momentum and market responses reveals a complex landscape where investor-friendly measures coexist with systemic hurdles. This analysis examines how recent reforms have shaped FDI inflows, the sectors driving growth, and the critical reforms needed to sustain long-term investor confidence.

Policy Momentum: Strengthening the Investment Framework

Romania's government has prioritized streamlining its FDI regime to align with EU standards and global investor expectations. A pivotal development was the establishment of the Romanian Agency for Investment and Foreign Trade (ARICE) in February 2023, which expanded its role beyond promotional services to coordinate with government officials and influence legislative processesForeign Direct Investment in Romania, 2023 Edition^[3]. This institutional shift reflects a commitment to reducing bureaucratic inefficiencies and enhancing transparency.

Legally, Romania has broadened its FDI screening framework. The 2023 Government Emergency Ordinance no. 108 extended scrutiny to all EU investments exceeding EUR 2 million in sensitive sectors, while Law 231/2024 clarified penalties for non-compliance and addressed the validity of pre-implemented transactionsForeign Direct Investment in Romania, 2023 Edition^[3]. These updates aim to create a predictable regulatory environment, a key concern for foreign investors.

Fiscal reforms have also gained traction. In response to a 2024 budget deficit exceeding 8% of GDP—driven by pre-election spending—the new government introduced austerity measures, including freezes on pensions and public sector salaries, to meet EU deficit targetsRomania political briefing: Romania’s Economic Crossroads in 2025: Fiscal Challenges and Policy Paths^[2]. These steps, part of an "omnibus decree," are critical for securing access to EU recovery funds, which underpin infrastructure and modernization projects.

Market Responses: Sectoral Shifts and Mixed Outcomes

The impact of these reforms on FDI inflows has been nuanced. While net FDI value declined by 11% year-over-year to EUR 5.7 billion in 2024Foreign Direct Investment in Romania, 2023 Edition^[3], the number of FDI projects surged by 57%, the highest growth since 2019Bridging Confidence and Commitment: Romania's path to …^[1]. This divergence highlights a shift toward technology-driven and capital-intensive investments. Manufacturing led the way, accounting for 41% of projects, followed by business support services (16%) and sales & marketing (15%)Bridging Confidence and Commitment: Romania's path to …^[1].

However, the 31% decline in job creation associated with these projects raises concerns about labor market integrationBridging Confidence and Commitment: Romania's path to …^[1]. Investors are increasingly prioritizing automation and R&D, which require upskilling the workforce—a challenge Romania must address to avoid stifling long-term growth.

The manufacturing sector's dominance underscores Romania's competitive advantages: strategic location, cost efficiency, and EU membership. Yet, structural bottlenecks persist. The European Commission has suspended disbursements under the National Recovery and Resilience Plan (PNRR) due to unmet conditions, such as microenterprise tax reforms and depoliticization of state-owned enterprisesForeign Direct Investment in Romania, 2023 Edition^[3]. These delays highlight the need for consistent policy execution.

Challenges and the Path Forward

Despite progress, Romania faces significant hurdles. Public debt rose to 53.1% of GDP by September 2024Romania political briefing: Romania’s Economic Crossroads in 2025: Fiscal Challenges and Policy Paths^[2], and the OECD projects GDP growth of 1.5% in 2025, driven by private consumption and EU-funded infrastructureRomania: OECD Economic Outlook, Volume 2025 Issue 1^[4]. Sustaining this momentum requires addressing macroeconomic stability and advancing structural reforms, including pension and tax overhaulsForeign Direct Investment Regimes Laws and Regulations, Romania^[5].

Investors have emphasized three priorities: tax predictability, regulatory simplification, and access to non-reimbursable fundingBridging Confidence and Commitment: Romania's path to …^[1]. Digitalizing permitting processes and improving infrastructure—particularly in logistics and energy—are also critical. The OECD notes that accelerating EU-funded projects could boost investment from 2025 onwardBridging Confidence and Commitment: Romania's path to …^[1], but this depends on resolving governance issues and reducing political interference in state enterprisesForeign Direct Investment in Romania, 2023 Edition^[3].

Conclusion: Balancing Opportunities and Risks

Romania's economic reforms have laid the groundwork for a more attractive investment climate, but their success hinges on resolving fiscal imbalances and administrative inefficiencies. The surge in FDI projects, particularly in high-value sectors, signals growing confidence in Romania's potential. However, without sustained progress on workforce development, infrastructure, and governance, the country risks falling short of its ambition to become a long-term FDI hub.

For investors, Romania remains a compelling but cautious bet. The strategic location, skilled labor force, and EU alignment offer opportunities, but navigating the evolving policy landscape requires agility and a long-term perspective. As the OECD and EY analyses suggest, Romania's trajectory will depend on its ability to bridge the gap between policy momentum and tangible market outcomesBridging Confidence and Commitment: Romania's path to …^[1]Romania: OECD Economic Outlook, Volume 2025 Issue 1^[4].