January 19 (SeeNews) - Italy's banking group UniCredit said it has downgraded its forecast for Romania's economic growth in 2024 to 3% from 4% in its June 2023 forecast, with growth to be driven by domestic demand fueled by real-income growth and government spending.
In 2024, industry and exports are expected to be slow due to weak demand from abroad, challenges in energy-intensive sectors, and low competitiveness in less valuable sectors, UniCredit said in the latest edition of its CEE Quarterly report released on Monday.
UniCredit also cut its estimate for Romania's gross domestic product (GDP) growth in 2023 to 1.4% from the 3% projected in June, the bank said.
In 2025, GDP growth is expected to slow further to 1.6% due to domestic demand growing at a much slower pace due to tax increases, UniCredit said.
Inflation is projected to remain above the target range of 6% in 2024 due to robust consumer demand and higher taxes. The National Bank of Romania (NBR) could initiate interest rate reductions in the second half of 2024, with interest rates expected to decline to 4% in 2025 as the budget deficit will tighten faster.
UniCredit's anticipated fiscal scenario for 2024-2025 involves the complete funding of Romania's current account deficit through EU transfers, foreign direct investment (FDI), and sovereign external borrowing.
Romania will host four election rounds in 2024, with European Parliament elections taking place on June 9, local administrations elections no later than 22 September, the presidential election probably before the end of November, maybe with local elections, and parliamentary elections after 6 December.
There is a potential for the PSD-PNL coalition to dissolve before elections due to disagreements over tax increases and a possible shift by PNL towards an anti-PSD stance. Despite this, a renewed coalition is likely after the elections, possibly with support from the Hungarian minority party, UDMR, UniCredit said.
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