Romania’s economy will expand by 3.9% this year and 2.9% in 2024, under the Summer Forecast published by the European Commission on July 14.

“Private consumption and investments are set to be the main growth drivers for this year and the next, while net exports are projected to act as a drag on GDP and lead to a widening of the trade deficit,” the report reads.

The EC revised upwards its forecast for this year from 2.6% under the Spring Forecast, in response to the strong 6.4% y/y GDP growth in Q1.

However, in line with the slower global and EU growth prospects, it adjusted its expectations for next year to 2.9%, from 3.6% under the Summer forecast.

Overall, there’s a 0.6% improvement in the combined growth rate for 2022-2023, from 6.3% to 6.9%.

For the rest of the forecast horizon, the EC sees both positive and negative factors intertwining. On the one hand, the high inflation is set to dent the purchasing power of households. On the other hand, the upbeat outlook in the labor market and the support measures announced by the government in April, notably for vulnerable households, should keep private consumption growing, albeit more moderately.

Prices are set to rise further over the forecast horizon because of energy, as not all consumers are covered by the capping scheme, and as numerous electricity and gas contracts will be renegotiated in the coming months.

Average annual HICP inflation is projected at 11.1% in 2022 before slowing down to 7.2% in 2023, as energy prices are set to moderate and base effects to kick-in.

Stronger wage dynamics than currently estimated represent an upward risk to the inflation forecast. 

(Photo: Anyaberkut/ Dreamstime)

iulian@romania-insider.com