Romania's economy to grow by 2.8 pct, end-2023 inflation seen at 7.4 pct (Forecast Commission)

The National Strategy and Forecast Commission (CNSP) has revised downwards its inflation estimate for the end of this year to 7.4 percent from 8 percent, while maintaining a cautious projection for Romania's 2023 economic advance of 2.8 percent, against the background of a still high inflation, yet with favorable outlooks determined by the upbeat trend in services, which could subsequently lead to an improvement in estimates.

Overall, constructions and services are expected to follow an upward trend, which is why figures were positively revised from the previous forecast (+0.8 and +0.4 percentage points respectively), but their positive contribution will be offset by industry, affected by supply chains dysfunctionalities and a moderate external demand.

On the other hand, the industrial activity will shrink under the impact of the still high electricity and gas prices, with energy-intensive sectors recording a business contraction this year as well. In this context, the Commission revised its previous forecast downwards by 0.8 percentage points, specifically from an increase of 0.6 percent to a decline of 0.2 percent in the current scenario.

In the medium term, the GDP annual growth rate is estimated at an average of 4.8 percent over 2024 - 2026, with a peak of 5 percent in 2025.

Net exports will maintain their negative contribution throughout the forecast interval, witnessing a gradual decreasing trend to 0.5 percentage points in 2026.

According to the CNSP, risks have become more balanced in recent months, but the uncertainties induced by the tense geopolitical situation render medium-term outlooks vulnerable, as the global economy adjusts after the shocks of 2020-2022 and the recent disturbances in the financial sector. Concerns about recession still prevail, and inflation may prove to be more persistent than expected, determining the continuation of a tighter monetary policy.