How Romania’s growth shift and AI are reshaping the job market

Over the past year, Romania’s macroeconomic landscape has shifted quickly. Economic growth, which was previously driven by consumption, is now being constrained by fiscal tightening, weaker domestic demand and a cooling labour market. While part of this adjustment reflects the economic cycle, the slowdown also points to a deeper structural shift: firms are increasingly relying on automation and artificial intelligence to boost productivity. As a result, future recoveries may deliver higher output without a corresponding increase in employment.

Romania ended 2025 on a difficult footing. Fourth quarter GDP contracted sharply from the third quarter, dropping 1.9% and pushing Romania into a technical recession. Full‑year growth was only 0.6%, following another weak year in 2024 when Romania also slipped into technical recession and grew just 0.9%.

The main drag has been private consumption – the engine of growth for more than a decade. Rising wages, pensions, and strong credit expansion had long upheld household spending despite lagging productivity. But with the budget deficit climbing above 9.0% of GDP in 2024, fiscal consolidation became unavoidable. The government responded with a substantial package of tax increases and spending controls. Higher taxes fed directly into prices, pushing inflation close to double digits again. At the same time, wage freezes and higher costs have reduced real disposable income. The result has been a more cautious business environment, with investment and hiring increasingly shaped by cost pressures and the need for resilience. Retail data confirms the strain: sales volumes fell in the second half of last year, and consumer confidence surveys show broad retrenchment.

This adjustment looks set to continue in 2026, when we expect GDP to grow only 0.6%. A more meaningful recovery, around 2.8%, is likely in 2027 as inflation moderates, monetary policy eases, and EU‑funded projects materialise. Yet even with higher GDP, job creation may not follow past patterns.

Labour market data already shows a deterioration. Total employment has been declining from its early‑2025 peak, slipping from a record 5.18 million in March to 5.12 million by December. Job vacancies sit at a weak 0.6%, placing Romania among the lowest in the European Union. Hiring has largely shifted from expansion to replacement, as firms focus on filling essential positions while curbing net job creation.

The unemployment rate remains stable at around 6.0%, but this resilience masks deeper structural issues. The working‑age population continues to shrink due to low birth rates and persistent emigration, reducing upward pressure on measured unemployment. At the same time, some displaced workers are becoming inactive or moving into informal employment or seasonal migration, rather than registering as unemployed. In 2024, the public sector temporarily absorbed labour, but fiscal tightening has ended that buffer.

Manufacturing remains under significant pressure. Weak demand from Germany and the broader eurozone continues to weigh on export-orientated industries while domestic demand has also been sluggish. Business surveys show expectations for further contraction, low order books, and excess capacity. Companies are trimming headcount gradually but steadily, as manufacturing employment dropped by almost 25k people year-on-year in December 2025, or approximately 2.5% of the total sectoral employment. At the same time, surveys and industry reports point to increasing interest among firms in technologies such as industrial robots and process automation as part of broader efforts to protect margins and improve productivity.

The construction sector has held up well so far in all segments, though the residential sector could be hit by the fall in purchasing power and increased taxes. Large-scale infrastructure projects, including around 700km of expressways funded by EU structural and recovery funds, have supported civil engineering activity, pushing sector employment to a record 462k in July 2025. However, the removal of long-standing tax exemptions for construction workers has increased labour costs, squeezing margins. Business sentiment in the sector has turned cautious, with 17.5% of surveyed managers forecasting workforce reductions in early 2026.

The services sector, particularly retail and hospitality, is directly exposed to weaker household purchasing power. Real wage erosion has forced consumers to prioritise essentials. While the annual momentum in employment is still positive, business surveys indicate that hiring is clearly turning more defensive, with greater reliance on cost control and flexible staffing arrangements where possible. The era of rapid service-sector job expansion appears to have paused.

The IT sector, long a major growth engine, is undergoing its own strategic shift. While turnover continues to rise, employment has started to edge downward. After years of rapid expansion fuelled by outsourcing and large-scale hiring of junior staff – pushing employment to record highs in late 2023 – the growth model has shifted, and headcount has been slowly declining ever since. At the global level, tech spending has moved decisively toward AI, data centres, and advanced software solutions. Demand should remain solid for high‑value, specialised roles, but entry‑level recruitment is likely to weaken further. The sector seems to be transitioning away from volume hiring and towards greater specialisation, efficiency, and productivity.

Nominal wages rose rapidly over the past decade, and average net earnings climbed to RON 5.914 per month at the end of 2025. However, inflation has severely eroded purchasing power. By the fourth quarter of 2025, real wages were contracting by around 5.0% year-on-year. With public sector wages frozen and private firms under margin pressure, real wage growth is unlikely in 2026, further weighing on consumption, hiring, and investment.

Another structural factor is the fast‑rising minimum wage, which has increased by roughly 15% annually over the past decade. This has compressed wage differentials and raised costs in labour‑intensive sectors. For firms operating on thin margins, automation is increasingly becoming the more viable alternative.

Romania’s traditional competitive advantage was the relatively low-cost labour within the EU. As wages have risen and labour supply has tightened, companies have naturally started to look toward investment in robotics and automation. According to the International Federation of Robotics, global industrial robot density has doubled over the past seven years to 162 units per 10,000 employees. While Romania still lags regional peers, automated assembly lines, robotic welding systems, and digital warehouse logistics are becoming far more common. Eurostat data also shows a sharp increase in AI adoption, suggesting a large and growing pipeline of firms that are implementing, planning, or testing automation and AI tools. For the future, the implication is straightforward: when needed, output can expand without proportional increases in employment.

At the same time, artificial intelligence is reshaping service‑sector work as AI tools enter everyday routines. Formal adoption by Romanian firms remains relatively low – though it is rising quickly – but individual use is expanding fast. A nationwide survey by Reveal Marketing Research in early 2026 found that 68% of Romanians have used AI tools at least occasionally, and 44% already rely on them for work‑related tasks such as administrative support, analysis, and content creation. This informal uptake suggests that AI is affecting service‑sector workflows even before widespread enterprise‑level deployment. Tasks once handled by entry‑level employees can now be automated or significantly streamlined. McKinsey estimates that the broader adoption of generative AI could add EUR30bn to EUR50bn to Romania’s GDP by 2040 through productivity and efficiency gains across both public and private sectors.

These changes, however, may also lead to job losses in areas such as junior IT roles, call centres, or routine administrative work as companies redirect resources toward digital infrastructure and automation. This shift risks creating a “barbell” labour market. Demand may continue to grow at the top end of the skill spectrum – where specialised roles in AI, engineering, and advanced management are enhanced rather than replaced by technology – and remain stable in low‑skill, non‑automatable services like care, hospitality, logistics, and on‑site work. By contrast, routine middle‑skill white‑collar jobs and lower‑skill repetitive tasks are increasingly likely to stagnate or decline.

2026 is likely to mark the bottom of the current cycle. Fiscal policy will stay tight, real incomes will remain weak, and firms will continue focusing on efficiency. Employment may drift lower even if unemployment remains stable. By 2027, conditions should improve: inflation should decline, monetary policy may normalise, EU-funded projects will work their way into the real economy, and external demand could strengthen. Yet the recovery is unlikely to generate the same breadth of job creation seen in past expansions.

During the current slowdown, firms are embedding automation and AI into their operations. When demand recovers, they might be able to increase output using the newly implemented technological capacity rather than launching broad hiring waves. The historical relationship between GDP growth and job creation could be weakening as we speak.

This is not necessarily negative. Romania faces a shrinking and ageing workforce and productivity gains are essential to sustaining growth and living standards. The current adjustment represents a necessary transition from a consumption-driven, labour-intensive model towards a more capital-intensive, productivity-based economy.

In the near term, weak job creation and subdued real incomes will remain a constraint. At a deeper level, however, Romania is undergoing a structural transition away from a labour‑intensive growth model. As firms rely more on technology, automation, and higher‑value activities, economic growth will increasingly be driven by higher output per worker rather than by absorbing more workers. This implies that future recoveries can be economically robust even if employment growth is more limited than in previous expansions.