Romania’s economy will grow by 2.5% this year and gradually accelerate up to 3.5% in 2025, while its twin deficits will gradually narrow starting this year, according to the new Autumn Forecast by the Vienna Institute for International Economic Studies (wiiw), which covers the 23 countries of the region.

The wiiw cut the growth forecast for the country by 0.5pp for 2023 and by 0.8pp each for 2024-2025, in line with the global and regional bleaker outlook.

For 2023, wiiw forecasts growth of 0.6% on average for the region’s EU members – similar to the low growth in the euro area (0.5%). This is half the growth rate forecast in the summer. 

Nevertheless, Romania is seen, besides Croatia, as the fastest-growing economy among the 11 CEE countries members of the European Union.

Notably, the wiiw projects slightly stronger growth rates in Romania compared to the International Monetary Fund (IMF sees 2.25% and 2.75% growth rates in 2023 and 2024) while at the same time projecting faster improvement in the twin deficits. 

Thus, wiiiw expects Romania’s public deficit at 5.7% this year and 4.5% in 2024 – 0.3pp and 0.5pp, respectively less compared to the Fund’s projections. In 2025, Romania’s public deficit will still miss the 3%-of-GDP target by 1pp, though, under the wiiw scenario.

Wiiw also trusts Romania’s CA deficit will shrink to a relatively safe value of 5.6% of GDP in 2024 (consistent with the slower fiscal stimulus), while the Fund sees Romania’s external deficit at 7.1% next year.

iulian@romania-insider.com

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