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Nov 11, 2022 13:35 EEST
November 11 (SeeNews) - The European Commission (EC) said on Friday that Romania’s economy is expected to expand by a real 5.8% in 2022, as compared to 3.9% growth rate projected in July, but lowered expectations for 2023 economic growth to 1.8% from previously estimated 2.9%.
After a strong 2022, Romania’s economy is set to slow down in the coming years due higher inflation, tighter financial conditions and the fallout from Russia’s war of aggression against Ukraine, the EC said in its Autumn 2022 Economic Forecast report.
Sectors like agriculture, extractive and chemical industry are projected to be particularly affected, the Commission added.
Still, beyond 2022 and due to the expected inflow of EU funds, in particular from the Recovery and Resilience Facility (RRF), gross fixed capital formation is expected to support real gross fomestic product (GDP) growth. Private consumption growth is expected to remain just positive as inflation is reducing households’ disposable income, while government support schemes and a resilient labour market offer some support, according to the report.
Romania’s economy is not expected to get support from the external sector. In 2022, strong domestic demand is set to widen the current account deficit further to 9.1%. Afterwards, the cooling of the economy provides a limited improvement, due to a lower demand for imports, the EC noted.
According to the EU's executive body, risks to Romania's macroeconomic forecast are tilted to the downside as delays in the implementation of its RRF plan reduce investments and growth.
The surge in energy and international food prices, has broadened into core inflation components, and is set to push nominal wages up, the Commission said, adding that against this backdrop, inflation is projected to remain persistent over the forecast horizon. As the energy support scheme is supposed to expire in the third quarter of 2023, retail energy prices are likely to increase. Overall, the Harmonised Index of Consumer Prices (HICP) is set to reach 11.8% in 2022, 10.2% in 2023, before falling to 6.8% in 2024.
Romania's consumer prices rose 15.32% on the year in October, compared to 15.88% in September, the national statistical office, INS, said on Friday.
In the Commission's view, risks to the fiscal forecast are tilted to the downside, as uncertainty around the final net impact of the energy measures, lower GDP growth, and the electoral cycle, with elections in 2024, could result in higher budget deficits.
The general government debt is projected to decrease to 47.9% of GDP in 2022, 47.3% in 2023, before increasing to 47.6% in 2024.
Romania's economic output will rise by an estimated 4.6% in 2022, finance ministry analysts said in October, improving their previous forecast for 3.5% growth.
In 2021, Romania's economic output increased by 5.9%, compared to a 3.9% contraction in 2020.
On Thursday, prime minister Nicolae Ciuca said that the government will submit to parliament the 2023 budget bill by the middle of December.
(1 euro=4.8902 lei)
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