CFA: Romanian economy is expected to grow modestly, recession not excluded

CFA Romania analysts anticipate a modest economic growth this year, but do not exclude a recession scenario amidst uncertainty, especially fiscal uncertainty, according to chairman of the CFA Romania Society Adrian Codirlasu."As the risk of a presidential election result that would have led Romania on a trajectory towards Euroscepticism has disappeared, the confidence indicator rose sharply in May. However, the risk of the Romanian economy remains high and is mainly caused by the unsustainable government deficit. Amidst uncertainties, especially fiscal uncertainty, the economy is expected to grow modestly, with a recession scenario for this year not being excluded," Codirlasu is quoted as saying in a CFA Romania press statement released on Thursday.In fact, the CFA Romania Macroeconomic Confidence Index increased strongly in May, by 11.5 points to 44.9 points.This situation was mainly due to a strong increase in the anticipation component of the indicator, by 15.2 points, while the current conditions component increased by 4.3 points,.At the same time, the expected inflation rate for the 12-month horizon (June 2026) increased from March to 4.87%.As for the EUR/RON exchange rate, about 70% of the participants anticipate a depreciation of the leu in the next 12 months.Thus, the average value of the anticipations for the 6-month horizon is RON 5.1046 to EUR 1, while for the 12-month horizon, the average value of the anticipated rate is RON 5.1723 to EUR 1.An additional question introduced in the survey refers to the expectations regarding Romania's downgrading to the junk rating category not recommended for investment.Thus, according to the results, 74% of the participants expect Romania in the next 12 months to stay in the rating category recommended for investments (up compared to the previous year), while 26% anticipate a downgrade to the junk category.For comparison, statistically, when an issuer's outlook is revised from "neutral" to "negative", in one out of three cases it is downgraded in the next 12 months. Also, the weaker the rating (example: BBB-, BB+), the higher the risk of downgrading from a negative perspective.Regarding the developments in residential property prices in cities, 60% of the participants anticipate a stagnation in the next 12 months, while 25% anticipate a decrease. Also, 60% of the participants consider that the current prices are overvalued, and 35% that they are correctly valued.According to CFA, the national government deficit forecast for 2025 decreased slightly from the previous year, to the average value of expectations of 7.7% of GDP.Economic growth expectations for 2025 are up from the year before, at an average value of 1.0%, and there are also opinions among the participants regarding the Romanian economy going into recession.At the same time, the public debt calculated as a percentage of GDP is expected to increase to 59% in the next 12 months.The survey has been conducted monthly by CFA Society Romania for over 13 years and it is an indicator designed to quantify the expectations of financial analysts regarding the economic activity in Romania for a time horizon of one year. The survey is conducted in the last week of each month, and the participants are members of the CFA Society Romania .The Macroeconomic Confidence Index ranges from 0 (lack of confidence) and 100 (full confidence in the Romanian economy) and is calculated based on six questions regarding: current conditions - related to the business environment and the labour market, as well as expectations for a one-year time horizon for: the business environment, the labour market, the evolution of personal income and the evolution of personal wealth at the level of the economy.In addition to the questions necessary for the calculation of the Macroeconomic Confidenceindex, the survey also evaluates the expectations, also for a one-year time horizon, for the inflation rate, interest rates, EUR/RON exchange rate, BET stock market index and global macroeconomic conditions.CFA Society Romania is an organisation of investment professionals in Romania, holders of the Chartered Financial Analyst (CFA) title, a qualification administered by the US CFA Institute.