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2023/03/09 / Erste Group Research

Slower economic growth and lower inflation in 2023

We expect Romania to avoid technical recession this year, supported by the recent improvement in external confidence indicators and record absorption of EU funds. Inflows of EU funds from both the Multiannual Financial Framework and Next Generation EU could climb to 4.0-5.0% of GDP in 2023 vs. 3.7% of GDP in 2022, augmenting gross fixed capital formation and potential growth. We forecast inflation to fall to single-digit levels in 3Q23 and end the year at 8.0%, amid declining futures commodities prices and the statistical base effect.

Lower import commodities prices and further budget deficit narrowing should lead to a correction in the C/A gap to around -7.9% of GDP in 2023 vs. -9.2% in 2022. The bulk of the widening in Romania’s C/A deficit in 2022 was due to the rise in the domestic investment rate, while the decline in the domestic savings rate was less important. With cooling inflationary pressures and the end of rate hiking cycles in the CEE region, we expect the NBR to keep the key rate unchanged at 7.00% throughout 2023. Liquidity management, the NBR’s favorite policy tool, is likely to be actively used in the following quarters, depending on the EUR/RON and upcoming inflation readings. We see the first rate cut by the NBR in 3Q24 against the backdrop of a still-challenging inflationary environment. While the decline of inflation from the November 2022 peak to single-digit territory could take three quarters, a further decline to cross into the NBR’s target range is likely to take an additional nine quarters.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusRomania
Currency in focusRomanian Leu
Sector in focus-


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