Romania

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Economic growth suffered a severe setback in 2023 on account of depressed domestic demand, stubborn inflation, sluggish external demand and public-sector wage restraint. Fixed investment financed by EU programmes boomed, but private investment fell. There was some modest GDP recovery from the middle of the year based on net exports, while industrial production and retail sales also recovered more recently. The year 2024 will be more buoyant, as moderate inflation will allow for higher consumption and investment. Labour shortages and compensation for the previous inflation will mean a hike in real incomes, as will the increase in the minimum wage and the forthcoming pension reform. Fiscal consolidation will be a key issue for economic policy, as that has been set as a condition for the smooth inflow of EU funds. New tax burdens on banks and companies have been introduced, which will hinder somewhat any revival of private investment. Further fiscal tightening may become necessary if the government is not able to improve tax collection through digitalisation. We reckon on a compromise with the European Commission that will allow protracted fiscal stabilisation and the implementation of public projects. Capital inflows (EU and FDI) will permit the financing of a considerable current account deficit. Exchange rate stability will not remain a major tool of anti-inflationary policy. The central bank will allow some modest depreciation, but it will be cautious about cutting the policy rate. On the whole, we expect higher fiscal deficits and lower economic growth than envisaged by the government for 2024, to be followed by modest acceleration of growth in the coming years.
        FORECAST*
Main Economic Indicators202120222023202420252026
Population, 1000 persons191221904718900...
GDP, real change in %5.74.12.13.03.53.7
GDP per capita (EUR at PPP)239402667028030...
Gross industrial production, real change in %7.1-1.8-4.8...
Unemployment rate - LFS, in %, average5.65.65.65.45.25.0
Average gross monthly wages, EUR112512421418...
Consumer prices, % p.a.4.112.09.76.04.03.5
Fiscal balance in % of GDP-7.2-6.3-6.2-5.0-4.0-3.5
Public debt in % of GDP48.547.550.0...
Current account in % of GDP-7.2-9.2-7.0-6.0-5.0-5.0
FDI inflow, EUR m9933109027579...
Gross external debt in % of GDP56.550.652.2...


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. 1/2024

Vasily Astrov, Alexandra Bykova, Rumen Dobrinsky, Selena Duraković, Meryem Gökten, Richard Grieveson, Doris Hanzl-Weiss, Gabor Hunya, Branimir Jovanović, Niko Korpar, Sebastian Leitner, Isilda Mara, Olga Pindyuk, Sandor Richter, Marko Sošić, Bernd Christoph Ströhm, Maryna Tverdostup and Adam Żurawski
wiiw Monthly Report No. 1, January 2024
50 pages including 5 Tables and 18 Figures

Details

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ROMANIA: How much fiscal consolidation?

Gabor Hunya
in: Beneath the Veneer of Calm
wiiw Forecast Report No. Autumn 2023, October 2023 , pp. 112-115
Details


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