The European Bank for Reconstruction and Development (EBRD) significantly worsened the estimates regarding the evolution of the Romanian economy in 2024, the lower demand for outsourcing affecting the IT sector, according to the report published by the international financial institution.
According to the latest forecasts of the EBRD, Romania’s GDP would register an advance of 1.4% this year, down from the estimate of 3.2% advanced in May. In 2025, growth would be 2.6%, from a level of 3.4% forecast in May.
EU countries in South-East Europe are affected by weak external demand, although consumption has been resilient, following solid wage increases. In Bulgaria and Romania, the increase in the minimum wage stimulated demand but also resulted in the expansion of the trade deficit and added to inflationary pressures, according to the EBRD report, according to Agerpres.
Against the background of weaker external demand, the growth of Romania’s economy slowed to 2.1% in 2023 and in the first semester of 2024 an advance of 1.3% would be recorded. Also, the IT sector slowed significantly, in line with global trends, while industrial production stagnated. On the other hand, infrastructure investments continue to support growth. Inflation proved to be constant, following the increases in salaries and pensions. In July 2024, the annual inflation rate of 5.8% was the highest in the EU, according to the EBRD.
In addition, the BNR reduced the interest rate twice in the summer of this year, to 6.5%. Fiscal policy continues to be expansionary, with the deficit in the first semester of 2024 being approximately 3.6% of GDP, higher than in the previous three years. While revenues had a good evolution in the first half of 2024, following the measures announced towards the end of 2023, expenses increased. Thus, capital expenditure, salaries and expenditure on goods and services all increased by more than 20% at an annual rate.
The most recent estimates of the Fiscal Council show an expansion of the deficit to 8% of GDP in 2024, it is also stated in the report of the international financial institution.
Romania’s GDP would grow by 1.4% in 2024 and by 2.6% in 2025, assuming that a recovery will already take place in the second semester of 2024, despite the need for fiscal consolidation. The EBRD warns that the delay in the absorption of European funds represents a risk to economic growth prospects.
And the International Monetary Fund (IMF) revised down the estimates regarding the growth of the Romanian economy this year, from 3.8% as forecast in October 2023, to 2.8%, according to the “World Economic Outlook” report, published in April.
Last week, the National Commission for Strategy and Forecast revised down to 2.8%, from 3.4% previously, the estimates regarding the PIV advance this year.