Romania

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Romania is confronted with surging inflation and the adverse spillovers from the war in neighbouring Ukraine. These challenges are leading to high fiscal and current account deficits, narrowing the room for public policies. The economy is suffering from high energy prices and input bottlenecks. Despite this household consumption expanded in the first four months of 2022, driven by pent-up demand and hoarding in the expectation of rising inflation. Reflecting the delayed impact of the adverse external environment and the relatively modest effects of Russian sanctions, the wiiw growth forecast has been adjusted upwards, by 1.5pp to 3.5% in 2022. Dependence on Russian oil and gas is relatively modest, but rising prices can put a serious strain on fuel consumers, especially in agriculture and transport. Protection is provided to the population in the form of price caps on household energy supply, excise tax reliefs and cash compensation to the poorest. The resulting fiscal expenditures will be partly offset by taxes on windfall profits. The government is likely to give up some of its austerity plans, and the deficit to GDP ratio will hit 6.5% in 2022. The central bank has applied only modest rate hikes to keep the economy afloat, but interventions on the currency market are keeping the leu by and large stable against the euro, thereby curtailing imported inflation. Money from the EU Recovery and Resilience Facility has started to flow, albeit with delays due to institutional bottlenecks. More abundant disbursements of EU funds with a strong impact on investments in 2023 would counterbalance the expected faltering of household consumption.
        FORECAST*
Main Economic Indicators201920202021202220232024
Population, 1000 persons193721926519120...
GDP, real change in %4.2-3.75.93.53.54.5
GDP per capita (EUR at PPP)216702150023530...
Gross industrial production, real change in %-2.3-9.27.1...
Unemployment rate - LFS, in %, average3.95.05.65.55.35.0
Average gross monthly wages, EUR102310771134...
Consumer prices, % p.a.3.92.34.112.07.04.0
Fiscal balance in % of GDP-4.4-9.3-7.1-6.5-5.0-4.0
Public debt in % of GDP35.347.248.8...
Current account in % of GDP-4.9-5.0-7.0-7.0-6.5-6.0
FDI inflow, EUR m657430568813...
Gross external debt in % of GDP49.257.956.1...


Basic data are continuously updated.

* Forecasts are changed beginning of January, April, July and November.
See Press Conferences.

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Monthly Report No. 7-8/2022

Vasily Astrov, Alexandra Bykova, Rumen Dobrinsky, Selena Duraković, Richard Grieveson, Doris Hanzl-Weiss, Gabor Hunya, Branimir Jovanović, Niko Korpar, Sebastian Leitner, Isilda Mara, Bernhard Moshammer, Olga Pindyuk, Sandor Richter, Bernd Christoph Ströhm, Maryna Tverdostup, Nina Vujanović, Zuzana Zavarská and Adam Żurawski
wiiw Monthly Report No. 7-8, July-August 2022
58 pages including 4 Tables and 21 Figures

Details

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ROMANIA: On the bumpy road to readjustment

Gabor Hunya
in: Overshadowed by War and Sanctions
wiiw Forecast Report No. Spring 2022, April 2022 , pp. 103-106
Details and Buy


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