The growth of Romania's gross domestic product (GDP) in 2023 is forecast at 4.5%, lower than the increase of 5.2% estimated in the autumn projection, the Commission said in its Winter 2022 Economic Forecast report.
The Commission estimates that Romania’s economy rose 6.3% in 2021, mainly driven by strong domestic demand.
However, towards the end of last year, growth momentum eased due to continued supply restrictions, a new Covid-19 infection wave and a strong pickup in inflation, the Commission added.
Despite this loss of momentum, which is set to continue into spring 2022, latest readings of sentiment indicators point to a rather positive, albeit moderate, growth outlook, in particular in services, retail trade, construction and industry, the winter forecast revealed. Private consumption is expected to pick up in the second half of 2022, when restrictions are set to ease and inflation to moderate. The Commission estimates investment will remain strong over the forecast horizon, supported by the Recovery and Resilience Facility and other EU funds.
The expected increase in interest rates, however, is projected to dampen private investments. Foreign trade is forecast to benefit from easing of supply bottlenecks, but not expected to provide a growth contribution.
Regarding inflation, the EC noted that the steep and continuous increase in energy prices pushed monthly Harmonised Index of Consumer Prices (HICP) inflation to 6.7% in December, lifting average inflation to 4.1% in 2021.
Prices are set to rise further in 2022 due to high energy prices and their pass-through into the prices of other goods and services, while food prices are also expected to increase on the back of higher prices and lower supply of fertilizers, the Commission estimates. Moreover, stronger wage dynamics than currently expected are an upward risk to the inflation forecast.
Average annual HICP inflation is set to rise to 5.3% in 2022, while for 2023 a decrease to 2.5% is projected, as energy prices are set to moderate and base effects will kick-in, the Commission concluded.
Jun 28, 2024
