In 2025, Romania's gross domestic product (GDP) growth is expected to slow down to 3.1% due to uncertainty regarding the composition of expected fiscal consolidation measures, the Commission said in its May 2024 Economic Forecast published on Wednesday.
At the beginning of 2024, private consumption rose strongly thanks to increases in pensions and public sector wages and will continue to be supported throughout the year by lower inflation, rising real disposable incomes and easing financial conditions. The projected further easing of monetary and financing conditions in 2025 should support private consumption despite a slowdown in the evolution of real disposable incomes.
"Public consumption remains strong and EU-funded investment in public infrastructure is forecast to continue at a brisk pace. Yet, residential constructions remain depressed, and growth in gross fixed capital formation is projected to slow significantly from 2023 levels," the Commission said.
Romania's current account deficit is expected to widen by 0.3 percentage points (pp) on the year to 7% of GDP in 2024, due to weak growth prospects in main EU trading partners weighing on exports, while imports are accelerating. The current account deficit will then narrow to 6.6% in 2025, the Commission predicts.
Disinflation is projected to slow down in 2024 and 2025 due to significant increases in wages and pensions, which put upward pressure on prices. Inflation rate is expected to shed an annual 3.8 pp to 5.9% at the end of 2024, before further dropping to 4% next year.
The Commission also said it revised upwards its estimate for Romania's GDP growth in 2023 to 2.1%, adding 0.3 percentage points (pp) to its February forecast.
In the European Union, GDP is expected to grow by 1% in 2024 and expand by 1.6% in 2025, while the Euro area's economic growth is projected at 0.8% and 1.4% in 2024 and 2025, respectively.
On Wednesday, the European Bank for Reconstruction and Development said it expects Romania's economic output to increase by 3.2% in 2024 and by 3.4% in 2025. Romania's central bank said it sees inflation at 4.9% and 3.5% in 2024 and 2025, respectively.