Erste Bank announced that it is cutting its 2024 growth forecast for Romania from 4.2% to 3.3% but is keeping its forecast for the current year at 2.1%.

The risks are that the GDP growth forecast for 2024 will be lower due to higher taxes on companies that risk discouraging private investments, slower implementation of planned public investments, delays in attracting EU funds, the decrease in consumer confidence as a result of the uncertainties inherent in an election year, and inflation more persistent than anticipated, according to a bank's report quoted by Profit.ro.

Erste also revised down by 0.2pp and 0.5pp its euro area growth forecasts for 2023 and 2024 to 0.7% and 1%, respectively.

BCR analysts expect Romania's economy to be supported next year by investments from EU funds, including PNRR funds, and private demand backed by growing wages. At the same time, higher wages, especially in industry, where they have outpaced productivity gains, are expected to fuel inflation, which will cause the National Bank of Romania (BNR) to keep interest rates high for longer.

"Higher interest rates for longer means lower economic growth and will certainly affect output for next year," the report reads.

Erste anticipates a 5.2% contraction of the industry this year and a return to growth to 2.8% next year.

iulian@romania-insider.com

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