Romania’s GDP will increase by 2.5% this year (from +4.5% in 2022), according to the latest forecast issued by the European Commission (EC) on February 13.

This is 0.7pp above the previous round of projections from the EC and not far from the official 2.8% growth projected under the scenario used by the Government for budget planning – making the country the third fastest-growing economy in the Union after Ireland and Malta.

The implementation of the Recovery and Resilience Plan (PNRR) should contribute to strong investment, the EC explains, stating that this is expected to be the main growth driver. Other EU funds are set to support investment as well.

Private consumption, although negatively affected by high inflation, is projected to grow due to increases in the minimum wage, pensions, and public sector wages, as well as the extension of the energy price cap until 2025.

Net exports are expected to remain negative on the back of a strong currency and low demand in export markets.

HICP inflation is expected to ease further over the forecast horizon, but only modestly as inflationary pressures remain very high in core components such as services, non-energy industrial goods and processed food. Average annual HICP inflation is projected at 9.7% for 2023 before slowing down to 5.5% in 2024 due to the extension of the energy price cap, lower commodity prices and base effects kicking in.

But the divergence between the EC and national projections becomes more visible when it comes to next year when the EC expects Romania’s economy to advance by only 3.0% – still the Union’s third-highest performance but at a significant spread versus the 4.8% rate projected by the national Government. 

iulian@romania-insider.com

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