Romania

Romania is located in Southeastern Europe, bordering Ukraine to the north, Moldova to the east, Bulgaria to the south, and Serbia and Hungary to the west. With a surface area of 238,397 km², it is the twelfth largest country in Europe. The estimated population in 2024 was around 18.7 million people, showing a slight decrease compared to 2023 due to a low birth rate and ongoing emigration. Bucharest, the capital, has about 1.8 million inhabitants and it is the main economic, political, and cultural center. Other major cities include Cluj-Napoca, Timișoara, Iași, and Constanța.

Economic outlook

In 2023, Romania’s GDP was estimated to be around €300 billion, representing a 4.5% growth compared to 2022, driven primarily by the recovery of domestic consumption and European investments. A moderate GDP growth of around 3.8% is expected for 2024. The GDP per capita in 2023 stood at approximately €15,800, still below the European average, highlighting a development gap compared to Western countries.

Exports, driven by the automotive and agri-food sectors, increased by 8% in 2023, reaching approximately €90 billion, while imports stood at around €120 billion, with a trade deficit of approximately €30 billion. Public debt in 2023 was around 50% of GDP, a relatively moderate level compared to the EU average, although rising due to economic stimulus measures. The unemployment rate has remained stable at 5.5%, while youth unemployment remains high at around 20%. Inflation, supported by energy and food costs, reached 9% in 2023 but it’s expected to decline to 6.5% in 2024 thanks to the National Bank’s restrictive monetary policies.

Forecast

iEconomic projections for 2024 are still being finalized, but a moderate GDP growth of around +3.8% is expected, with inflation slightly decreasing towards 6.5%, supported by the restrictive monetary policy of the National Bank of Romania. Foreign direct investments, growing especially in the technology and renewable energy sectors, are expected to continue supporting a positive economic trend, despite challenges posed by inflation and trade deficit.

For 2025, GDP growth is estimated to remain stable at around 3.5%, while inflation is expected to stabilize around 5%. The continued inflow of investments and structural reforms will help strengthen economic resilience, although uncertainties related to external factors and global risks remain.

Country risk

Romania presents a medium country risk, influenced by internal political instability and the impact of the war in Ukraine. Despite being a member of the EU and NATO, the fragmented political system and frequent government crises represent a source of uncertainty for investors.

Foreign direct investements

In 2023, Romania attracted around €11 billion in FDI, marking an increase compared to the previous year, especially in the manufacturing, IT, real estate, infrastructure, and renewable energy sectors. Germany, France, and the Netherlands remain the main investors, drawn by the country’s strategic location and competitive production costs.

Geopolitical analysis

Role in the European Union

An EU member since 2007, Romania has benefited from structural funds to modernize its economy and infrastructure but is not yet part of the eurozone. It faces significant challenges in terms of corruption and administrative transparency. Politically, it supports strong European integration and enhanced cooperation on security and defense, especially in the regional context

Transatlantic Relations and NATO

Romania, a NATO member since 2004, holds a strategic position on the Alliance’s eastern flank, which is crucial for containing threats from Russia and ensuring stability in the Black Sea region. Bilateral relations with the United States are very strong, with the country hosting US bases and troops, as well as anti-missile systems. Following the war in Ukraine, Romania has increased its defense spending and strengthened cooperation with NATO allies, highlighting its role as a key stronghold against regional tensions.

Relations with the Balkan Countries and Eastern Europe

Given its geographical location, Romania is closely connected to both the Balkans and Eastern European countries, playing a mediating role and promoting stability in the region. Bilateral relations with Moldova are particularly significant, as Bucharest has strongly supported the country’s European integration process, while also maintaining a strong cultural influence. At the same time, Romania has supported EU expansion in the Western Balkans, positioning itself as a key interlocutor for the region’s stability and development.

Geopolitical challenges: energy crisis and war in Ukraine

The war in Ukraine has placed Romania in a delicate position, not only in terms of security but also in terms of energy supply. Although the country is less dependent on Russian gas compared to other EU members, the increase in energy prices has had significant effects on the economy. The Romanian government has strengthened plans for energy self-sufficiency and intensified renewable energy and Black Sea gas projects, aiming to become an energy hub for the southeastern European region.

Migration Policy and Internal Security

Romania is one of the main entry points to the EU for migrants coming from Ukraine and the Balkans. The management of migration and Ukrainian refugees has strengthened its position as a reliable partner within the EU, although migration pressure and risks related to organized crime remain significant challenges. In particular, Romania is one of the main transit country for drug and human trafficking, problems the government is trying to counter through increased cooperation with European and international security forces.

Relations with China

In recent years, Romania has maintained a cautious stance towards China, with limited economic relations. Unlike other Central and Eastern European countries, Bucharest has declined some Chinese investment offers in strategic infrastructure, aligning itself more closely with the security interests of the EU and NATO. Romania continues to seek a balance between attracting foreign investments and protecting its national security, while remaining open to economic cooperation as long as it complies with EU standards.

Moldova

Moldova is an Eastern European country situated between Romania and Ukraine. It has no access to the sea, although it has a harbour on the Danube that connects to the Black Sea. It covers an area of 33,851 square kilometres, about one tenth of Italy, and follows the borders of the region of Bessarabia, between the Prut River to the west and the Dnestr to the east, and Transnistria, between the Dnestr to the west and Ukraine to the east.

The resident population is 2.4 million, half of whom live in urban areas. For more than a decade, there has been a negative demographic balance due to strong emigration to neighbouring countries, mainly involving highly educated young people.

The ethnic composition is predominantly Moldovan/Romanian (78%), followed by 7% Ukrainian, a percentage increased by the large influx of refugees following the conflict in 2022. There is also a 5% Russian ethnic population, concentrated in the Transnistria region, and a small Turkish-speaking minority, the Gaugazi.

Economic outlook

Moldova is the poorest country in Europe. It remains a heavily agricultural economy, with cereal farming employing around 40% of the workforce, indicating a marked absence of tertiarisation and industrialisation processes. This backward economic structure limits the country’s ability to diversify its growth and boost productivity. The situation is further aggravated by the secession of Transnistria, which deprived Moldova of its main power plants, forcing it to rely on expensive energy imports, particularly from Russian operators, with whom it has accumulated significant debts.

Moldova’s GDP currently stands at around €18.2 billion. Energy dependence is a major source of instability, especially in terms of prices: inflation, which reached 13% in 2023, fell to 4.5% in 2024, but remains exposed to further spikes, partly due to the suspension of the gas transit contract with Ukraine. In response, the Central Bank of Moldova has adopted a restrictive monetary policy, raising interest rates to 6.5% in 2025 to curb inflation and stabilise the currency.

The fiscal situation is complex: the public deficit has reached 16% of GDP, driven by a large trade deficit (with only €3.2 billion in exports compared to €8.4 billion in imports), while public or state-guaranteed debt remains at relatively low levels, but is growing, at around 37.5% of GDP. These structural imbalances are putting pressure on the sustainability of public finances and necessitate far-reaching reforms to boost competitiveness and reduce the country’s external vulnerability.

Forecast

In 2025, the Moldovan economy will grow modestly by 0.9%, held back by rising energy prices that limit consumption and investment. Public support will offer some relief, but growth will be driven mainly by public spending. Exports will remain weak, while the medium-term recovery will be supported by reforms and integration with the EU. The IT and services sectors will lead growth, with a gradual improvement in investment. Inflation and the deficit will remain high in the short term, but are expected to improve by 2027.

Foreign direct investments

In recent years, foreign direct investment (FDI) in Moldova has fluctuated, reflecting both opportunities and structural weaknesses. After peaking at $586 million in 2022, inflows fell to around $344 million in 2024, less than 2% of GDP, signalling a decline in international confidence in a still unstable economic environment. The most attractive sectors remain manufacturing, financial services and ICT, with growing interest linked to the European integration process.

However, factors such as energy price volatility, weak rule of law and regulatory uncertainty continue to hamper the country’s potential attractiveness. Moldova is seeking to boost FDI through tax incentives, special economic zones and structural reforms, focusing on innovative sectors and proximity to EU markets.

Country risk

Moldova has a medium-high risk profile, with significant challenges in terms of governance, corruption, debt sustainability and financial transparency, compounded by geopolitical risk in the context of the confrontation between Russia, Ukraine and Europe.

Fitch assigns Moldova a B+ Outlook stable rating, while Transparency International ranks it 76th out of 180 countries in the Corruption Perceptions Index. Moldova’s business environment presents a risk of 6/7 for the NGO Credendo, with critical issues in terms of currency transferability and the OECD export credit guarantee premium.

On the security front, the International Crisis Group has twice activated a “conflict alert” for Moldova in the last two years, indicating a potential outbreak of armed conflict. The separatist region of Transnistria, occupied by Russian military forces, was the trigger in both cases.

Geopolitical Analysis

Moldova’s positioning in an area of influence historically disputed between great empires has strongly characterised its geopolitical trajectory, marked by the search for a delicate balance between internal aspirations and external constraints.

Historical Background

Stolen from the Ottoman Empire by Alexander I in the Russo-Turkish War of 1812, the then Bessarabia remained part of Russia until 1856, when the Crimean War brought it back to Romania. It then returned to Russian control in 1878 until 1917, when, following the October Revolution, it came under Romanian sovereignty.

In 1924, Russia administratively separated present-day Transnistria from Ukraine, which was united with Bessarabia in 1939 under the Molotov-Ribbentrop Pact to create present-day Moldova. Since then, except for a brief German occupation during WW2, Moldova has formed the western border of the Union of Soviet Socialist Republics, until its dissolution and the simultaneous declaration of independence in 1991.

The case of transnistria

Such a turbulent historical process has resulted in an extremely diverse ethnic and cultural landscape, which turned into conflict at the very moment of deciding the future geopolitical alignment of the newly formed republic.

While Moldova west of the Nistru looked to the West to escape its deep socio-economic underdevelopment, Transnistria, which had been under permanent Russian rule since 1812, refused to consider itself part of the new republic and put up armed resistance to Moldovan attempts at pacification, with the active support of the Russian Federation. The conflict escalated into open warfare in March 1992, with hostilities lasting four months and Russia’s terms prevailing in the ceasefire agreement. The Transnistria region remains under the military control of Russian peacekeepers to this day.

Relations with Russia

Russia has long played a central role in Moldova’s political, economic, and security affairs. Until the outbreak of the Russia-Ukraine conflict, Moldova was almost entirely dependent on Russia for energy supplies, while the Russian market was the main destination for Moldovan agri-food exports. Furthermore, Moscow has always been an essential player in security matters, particularly concerning the military presence in the separatist region of Transnistria.

In the first decade after independence, Moldova actively participated in various dialogue and negotiation attempts within NATO and OSCE to resolve the Transnistrian issue. Key moments include the 2003 Kozak Memorandum, which proposed an asymmetric federation, and the Treaty on Conventional Armed Forces in Europe (CFE), which regulated the presence of Russian troops in Moldova. Since 2005, negotiations have continued in the so-called “5+2” format, involving Moldova, Transnistria, Russia, Ukraine, the OSCE, and EU and US observers. However, these negotiations have been effectively frozen since 2019, partly due to regional tensions caused by Russia’s aggression against Ukraine.

The events in Georgia in 2008, a country facing similar issues in its relations with Russia, contributed to a gradual shift of Moldovan political forces toward more pro-European positions. The war in Ukraine further accelerated this trend, pushing Moldova to diversify its energy sources and reduce a nearly forty-year dependency on Russia. This process of European integration has inevitably heightened tensions with Moscow.

Russia has responded to this shift with a series of hybrid warfare tactics, including disinformation campaigns, political pressure, and internal destabilization attempts, often visible during election campaigns. The September 2025 parliamentary elections, won by the pro-European PAS party led by President Maia Sandu, were marked by heavy disinformation campaigns and threats at polling stations, as reported by international observers such as the OSCE.

Relations with Europe

Relations between Moldova and the European Union began with the signing of the Partnership and Cooperation Agreement (PCA) in November 1994, which entered into force in July 1998. This agreement provided the first institutional framework for political, economic, and social cooperation between the two parties. Over the years, these relations have progressively strengthened, particularly with Moldova’s inclusion in the European Neighbourhood Policy and, subsequently, in the “Wider Europe – Neighbourhood” initiative, which paved the way for the adoption of an EU-Moldova Action Plan.

A key milestone came in January 2008 with the entry into force of a visa facilitation agreement, a readmission agreement, and the introduction of a new preferential trade regime (Autonomous Trade Preferences, ATP). A few months later, in June 2008, a Declaration on the Mobility Partnership was also signed, aimed at improving the management of migration flows between Moldova and EU member states.

A major turning point in relations occurred with the signing of the EU-Moldova Association Agreement in June 2014, which fully entered into force on July 1, 2016, replacing the PCA. This agreement includes a Deep and Comprehensive Free Trade Area (DCFTA), gradually integrating Moldova’s economy into the European single market and accelerating the country’s internal reforms.

The war in Ukraine acted as a further catalyst for Moldova’s rapprochement with the EU. In June 2022, the European Council granted Moldova candidate status for EU membership, marking a historic step. In its November 2023 report, the European Commission acknowledged the significant progress made by the Moldovan government and formally recommended the opening of accession negotiations, which were approved in December 2023.

To support this process, the EU launched the EU Support Package for Moldova, a package worth over €1 billion for the 2023–2027 period, aimed at strengthening the country’s economic and energy resilience. Additionally, in May 2023, the EU Partnership Mission in Moldova (EUPM Moldova) was established to enhance Moldova’s capacities in security, countering hybrid threats, and protecting critical infrastructure, further consolidating the strategic link between Chișinău and Brussels.