EC positively evaluates Romania’s economy in 2024, with better prospects than other EU states in 2025

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Brussels, May 15, 2024 – RBJ – In the EC’s spring economic forecasts, published today, Romania’s economy is viewed positively, with good prospects this year and next year.

Real GDP growth in Romania is set to pick up above 3% over the forecast horizon, thanks to accelerating private consumption supported by higher real disposable incomes. Financial conditions are expected to ease and public investment to remain robust, but external demand from main EU trading partners is set to be weak in 2024. Inflation is projected to continue declining, but only gradually, and unemployment is expected to remain broadly unchanged. The general government deficit is set to increase to about 7% of GDP in 2024 and 2025, due to strong growth in expenditure. The debt-to-GDP ratio is forecast to reach 54% in 2025.
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Indicators                                               2023                    2024                   2025
GDP growth (%, yoy)                                   2.1                         3.3                        3.1
Inflation (%, yoy)                                        9.7                         5.9                        4.0
Unemployment (%)                                     5.6                          5.5                       5.5
General government
balance (% of GDP)                                   -6.6                         -6.9                      -7.0
Gross public debt
(% of GDP)                                               48.8                          50.9                    53.9
Current account
balance (% of GDP)                                  -6.7                           -7.0                     -6.6
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Strong domestic demand pushes up growth

Economic activity rebounded at the beginning of 2024, following relatively muted real GDP growth of 2.1% in 2023. Private consumption picked up strongly due to increases in pensions and public sector wages. New orders in manufacturing are picking up and business sentiment remains favourable. For the entire 2024, lower inflation, rising real disposable incomes and easing financial conditions are set to support private consumption further. Public consumption remains strong and EU-funded investment in public infrastructure is forecast to continue at a brisk pace. Yet, residential constructions remain depressed, and growth in gross fixed capital formation is projected to slow significantly from 2023 levels. Weak growth prospects in main EU trading partners weigh on exports, while imports are accelerating, leading to a negative contribution of net exports to GDP growth and to a small widening of the current account deficit. Overall, real GDP growth is projected to accelerate to 3.3% in 2024.

The expected further easing of monetary and financing conditions in 2025 should support private consumption despite slowing growth of real disposable incomes. At the same time, uncertainty regarding the path and composition of fiscal consolidation measures may dent business sentiment and private investment. Overall, real GDP is forecast to grow at around 3.1%. More muted domestic demand and a pick-up in exports should reduce the negative contribution of net exports to GDP growth and the current account deficit below 7% of GDP.

 

 

 

 

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