Despite political uncertainty, Romania has an opportunity to secure its status as an attractive investment market

The resignation of Romanian President Klaus Iohannis (pictured) threatens to impact Romania’s general economic stability. With the country in political turmoil, once the immediate issue is resolved, it needs to send a message of confidence to international investors.

On 12 February 2025, Romanian President Klaus Iohannis officially stood down after over a decade in office following a surge in support for the far-right opposition which left him facing impeachment.

The rapid surge in support for Călin Georgescu and Romania’s current political instability now threatens to overshadow what has been a period of significant growth for the Romania’s economy.

Over the past decade, Romania has quietly been having an economic renaissance, with growth in 2025 and 2026 predicted at 2.5% and 2.9% respectively. The World Bank notes that an acceleration of private investment, a decline in unemployment, and access to EU-funded investment have all driven growth expectations.

Another significant asset has been Romania’s relative political stability, which has promoted investor confidence through domestic policies, as well as Romania’s close relationship with the EU. Romania joined the Schengen Area on 1st January 2025 in, what is expected to be, another boost to its trade and internal market.

However, at the same time Romania has struggled to manage its budget deficit, which, according to the Financial Times, was “Europe’s highest last year at more than 8 per cent of GDP”. In addition, Global Capital notes that the surge in support for the Georgescu in Romania could “complicate efforts to reduce deficits and threaten EU funding”. Any impact on foreign direct investment (‘FDI’) to Romania would have a significant impact on the Romanian economy, with FDI totalling USD$11.2 billion in 2022, according to UNCTAD’s World Investment Report 2023.

Political uncertainty over the relationship between Romania and the EU, and the future of foreign direct investments mean that Romania’s economic outlook is now unclear. International investors are monitoring the situation closely to see what the potential economic impact of the political fallout would be.

Beyond the immediate political turmoil, a key issue for whoever is next in power will be to stabilize the economy and promote Romania as a destination for foreign investors. As Bloomberg notes, Romania has emerged as “something of a poster child for economic development” in no small part because of its stable politics, but now, “a fiscal reckoning is inevitable”.

With the rerun of the presidential vote scheduled for 4 May 2025, all candidates should be considering how to secure Romania’s economy and attractiveness as a destination for foreign investors.

One option would be to signal Romania’s commitment to a close relationship with the EU. This is potentially unlikely under Georgescu, the opposition candidate, who has previously expressed criticism of the European Union and NATO. Analysts and investors have raised concerns that should Georgescu come to power, it could lead to clash with the EU and a reduction of the vital EU funding that Romania relies upon.

Another possible method, and shorter-term solution, would be to ensure international standards are upheld, particularly arbitration rulings by the International Centre for Settlement of Investment Disputes (‘ICSID’). ICSID is an internationally accepted forum for investor-state disputes. By enforcing these rulings, Romania would announce to foreign investors that it was committed to upholding the rule of law and to maintaining an investor-friendly economic environment.

One outstanding case relates to Petrochemical Holding GmbH, an Austrian company which won a case against Romania in November 2024 in relation to claims bought under the Energy Charter Treaty, whose award is final and binding. However, the award of €85 million has not yet been paid by Romania. According to ICSID data, there are no fewer than 8 pending cases against Romania where it is a defender in investment disputes.

Finally, key to ensuring investor confidence will be the orderly transition of power to the new head of state. Despite the controversy surrounding the first round of the election, should the final results be uncontested and undisputed, investors would surely see this as a positive sign for longer term foreign investments. It could also signal a closer relationship with the EU and other democratic nations and institutions.

Following the outcome of the election, the winner has the opportunity to secure a political victory by shoring up investor support and building confidence in Romania as an investment market. By demonstrating a return to political stability and prioritising relations with foreign investors, Romania can reassert itself as an attractive market with strong growth prospects and policies that support investment.

While the current political turmoil has created uncertainty for investors, the long-term outlook remains positive. Nevertheless, the onus for whoever becomes President in Romania will be on demonstrating a commitment to stability and long-term economic progress, which is harmed by infringements of foreign investors' rights.

With the political situation still influx, investors, companies and analysts will be closely monitoring the situation and the actions of Romania’s current and future policymakers.

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