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Economy and Finance

Economic forecast for Romania

The latest macroeconomic forecast for Romania.

Indicators 2023 2024 2025
GDP growth (%. yoy) 1.8 2.9 3.2
Inflation (%. yoy) 9.7 5.8 3.6

Economic growth is estimated to have decelerated to 1.8% in 2023, a 0.4 pps. downward revision from the Autumn Forecast. High inflation and anaemic private credit growth constrained domestic demand in 2023, while external demand was weak. A strong increase in gross fixed capital formation spurred by EU-funded investment in public infrastructure compensated for the slowdown in private consumption and lower inventories, while the negative contribution of net exports to growth subsided. A resilient labour market and two hikes of minimum wages cushioned the deceleration of real disposable incomes. After a weak third quarter, short-term indicators suggest that the economy regained some momentum in the last months of 2023, on the back of retail sales, services and robust construction.

This pick-up and slight improvements in some outlook sentiment indicators bode well for economic activity in 2024. Backed by prospects for stronger private credit growth and continued increases in real disposable incomes, real GDP is set to grow by 2.9% in 2024, slightly less than expected in autumn. While private consumption is expected to accelerate, investment will remain the main contributor to GDP growth also this year. Monetary policy is set to remain tight in 2024 and only relax gradually, as inflationary pressures abate. This easing of monetary and financial conditions, accompanied by stronger external demand, are set to lead to real GDP growth of 3.2% in 2025, also slightly below the Autumn 2023 Forecast.

HICP inflation decelerated to 7% in December of last year, bringing overall inflation in 2023 down to 9.7% from 12% in 2022. The easing of inflation can be attributed to a significant slowdown in private credit growth amid tight monetary conditions, and to lower energy and food prices.  Inflation excluding energy and food declined less and remained above headline inflation at the end of 2023, with strong price growth in services and non-food prices. Except for a brief pause at the beginning of 2024 following some increases in indirect taxes, prices are set to decelerate further over the forecast horizon. Average annual HICP inflation is projected at 5.8% in 2024 before slowing down to 3.6% in 2025, broadly unchanged from autumn. Risks are, however, tilted towards a more gradual disinflationary process if salaries and pensions continue to increase fast.