Economic Outline

Economic Indicators

Following robust economic growth in 2022 (+4.7%) driven by private consumption and investments, activity is estimated to have decelerated to 1.8% in 2023 as high inflation and sluggish private credit growth constrained domestic demand, while external demand remained weak (EU Commission). Supported by the outlook for stronger private credit growth and ongoing rises in real disposable incomes, real GDP is projected to expand by 2.9% in 2024. Private consumption is anticipated to accelerate, while investment will continue to be the primary driver of GDP growth this year. The relaxation of monetary and financial conditions, coupled with increased external demand, is expected to drive real GDP growth to 3.2% in 2025 (EU Commission).

According to preliminary estimates from the Finance Ministry, the general government budget in Romania amounted to RON 89.94 billion (EUR 18.1 billion, in cash terms), equivalent to 5.68% of GDP in 2023. The country's public deficit rose by 11% year-on-year in nominal terms in 2023. However, due to the slightly faster growth of nominal GDP, there was a marginal improvement in the deficit-to-GDP ratio, which stood at 5.75% in 2022. The target set for 2024 is 4.9% of GDP. However, the promised wage hikes in the public sector, pension increases, and other expected public expenditures in the electoral context pose challenges to achieving this target. Public debt-to-GDP increased to 51% in 2023 from 50.5% one year earlier, and is expected to reach 55.2% by 2025 (IMF). In 2023, overall inflation decreased to 9.7% from 12% in 2022, primarily due to a notable slowdown in private credit growth amidst tight monetary conditions and reduced energy and food prices. However, inflation excluding energy and food saw a smaller decline and remained above headline inflation by the end of 2023, driven by robust price growth in services and non-food items. Average annual HICP inflation is forecasted at 5.8% in 2024 before moderating to 3.6% in 2025 (EU Commission).

An ageing population, the emigration of skilled labor, significant tax evasion, and insufficient health care may compromise Romania’s long-term growth and economic stability and are the economy's top vulnerabilities. Despite a relatively low level of unemployment (at 5.6% in 2023), Romania remains one of the poorest countries in Europe, with 34.4% of the population at risk of poverty or social exclusion (the highest ratio in the EU - data by Eurostat). The World Bank estimated the country’s GDP per capita (PPP) at USD 41,888 in 2022, still 22.7% below the EU average. A resilient labor market, coupled with two increases in minimum wages, helped mitigate the slowdown in real disposable incomes in 2023.

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