EC, Spring 2023 Economic Forecast: Romania has the best economic growth forecast for this year and next year. Poland, Hungary, Czechia, after Romania

The European Commission on Monday improved its estimates for Romania’s GDP growth this year and next year and maintained its inflation projection for 2023, according to the spring economic forecast.
The Romanian economy would register an increase of 3.2% in 2023 and 3.5% in 2024, according to the European Executive, which warns, however, that delays in the implementation of the PNNR could reduce investments.
In the winter forecasts, the European Commission estimates an advance of Romania’s GDP of 2.5% in 2023 and 3% in 2024.
For Poland, Hungary and Czechia, the EC report predicts economic growth of 0.5% and 2.7%, for Hungary 0.5% and 2.8%, for Czechia 0.2% and 2.6%.
As for inflation, current estimates point to a level of 9.7% in 2023 and 4.6% in 2024, after, in previous forecasts, the EC predicted inflation of 9.7% this year and 5.5% next year future.
In Romania, inflation would reach its peak in 2023, and the consumer price index will remain above the inflation target in 2023 – 2024, the Community Executive predicts.
The budget deficit should stand at 4.7% of GDP in 2023 and decrease to 4.4% of GDP in 2024, due to the solid increase in revenues, following the amendment of the Fiscal Code, the robust level of nominal GDP and of the decrease in spending as a percentage of GDP. The level of debt as a percentage of GDP would stand at 45.6% in 2023 and reach 46.1% of GDP in 2024, the European Commission estimates.
In 2022, the economy registered a growth of 4.7%, thanks to solid private consumption and robust investments. In the future, high inflation, tightening financing conditions and a slower economic advance of trading partners would slow down growth. Despite these turbulences, private consumption growth should remain positive, thanks to wage and pension increases, as well as the extension of the energy price cap until 2025. Also, government support schemes and a resilient labor market will support economic activity.
Despite solid economic growth, prospects on the labor market remain limited, as population aging and mass migration negatively affect job creation. However, the labor market integration of people who fled the war in Ukraine and the granting of visas for non-EU workers could act as mitigating factors. The unemployment rate would decrease slightly, to 5.4% in 2023 and 5.1% in 2024.
The Harmonized Index of Consumer Prices peaked in November and then fell to 12.2% in March as energy prices fell. Due to the energy price ceiling scheme, no major changes in this component are expected. However, core inflation continued to rise, following price increases in processed food and services.
The budget deficit is expected to fall to 4.7% of GDP in 2023, from 6.2% of GDP in 2022. Robust nominal GDP growth and high energy taxes are expected to boost government revenues in 2023. Spending would was to increase less than the nominal GDP, determined by a moderation of salaries in the public sector. Public investments as a percentage of GDP should increase, reflecting the ambitious domestic budget targets and the massive inflows of European funds.
The deficit would decrease to approximately 4.4% of GDP in 2024, following the decrease in the share of expenditure in GDP. Also, the increase in capital expenditures would slow down.
Government debt is expected to decline to 45.6% of GDP in 2023, following deficit reduction, before rising to 46.1% of GDP in 2024. Risks to the fiscal outlook are tilted to the downside. A lower economic growth, the upcoming electoral cycle, possible pressures to increase wages in the public sector, the indexation of pensions, which in 2024 will incorporate the high inflation of 2022, could result in higher budget deficits, warns the European Commission.