WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

The household consumption-based economic boom has given way to slower growth, driven mainly by fixed capital formation. The erosion of purchasing power – a result of soaring inflation and sluggish wage growth – will persist in the first half of 2023. Inflation may start to fall by the middle of the year, as import prices stabilise and agricultural production recovers from last year’s slump. The country’s slight exposure to the Russian economy and its limited reliance on energy imports overall should help maintain stability. The moderate fiscal consolidation planned may not depress the economy and should allow the energy subsidies to continue. The current account deficit will stay high, but external financing needs will shrink somewhat. The central bank is managing to keep the exchange rate stable, which helps in the fight against inflation but damages the competitiveness of Romanian products. Elevated FDI and EU transfers will continue to play a crucial role in financing fixed investments. Romania is on track to meet the conditions for the disbursement of EU funds, though delays could possibly emerge due largely to the sluggish implementation of projects. In 2023, Romania will take further steps to strengthen its energy self-sufficiency; will continue to benefit from the trade and transport re-direction from Ukraine and Moldova; and will most probably gain access to the Schengen area, which will reduce transaction costs.