EBRD Foresees Romania’s Economic Acceleration By 2025

According to a report from the European Bank for Reconstruction and Development (EBRD), the organization has maintained its projections for the Romanian economy in 2024. It cautions that the primary vulnerability continues to be the fiscal position. According to the latest forecasts by the EBRD, Romania’s GDP is expected to grow by 3.2% this year, similar to the estimates from September 2023. The growth is projected to accelerate to 3.4% next year, as stated in the report released during the EBRD’s annual meeting.   According to the EBRD, the growth rate of the Romanian economy slowed down significantly in 2023, to 2.1%, even if this was one of the best performances recorded at the regional level. However, the decrease in private consumption, in the context of high inflation, was counteracted by the increase in investments and government spending.   After a weak 2023, industrial production began to recover, as automobile production increased by 7% at an annual rate in the first quarter. In addition, for the first time after 2016, exports made a positive contribution to economic growth, EBRD estimates.   “The main vulnerability remains the fiscal position, given that the fiscal deficit has worsened to 5.9% of GDP in 2023 (in cash). Public spending is expected to increase further, in the context of the increase in salaries in the public system and pensions, supporting consumption but risking creating an even bigger deficit in 2024,” the EBRD warns.   “Economic growth is expected to reach 3.2% in 2024 and 3.4% in 2025 as inflation moderates and financial conditions gradually ease. A painful fiscal consolidation from 2025 and possible market pressures are the main risks to economic growth in the medium term”, the report of the international financial institution also states. Overall, the EBRD is currently less optimistic about the economic outlook for the approximately 40 countries in which it operates. According to the most recent forecasts, the region where the EBRD operates should register an economic growth of 3% this year, above the 2.5% recorded in 2023. However, this year’s advance would be 0.2 % lower than the one estimated in September.   “This year will be a better one. But of course, there is a lot of uncertainty. The sad news is that the countries in which we operate are now affected by the consequences of two wars: the one in Ukraine and the one in Gaza,” said the EBRD’s chief economist, Beata Javorcik.