Research Detail
| 2023/09/08 / Erste Group Research |
Fiscal challenges back in spotlight The government has managed to grow/inflate its way out of fiscal problems so far, kicking the can down the road without major adjustment in broadening the tax base to increase recurrent state revenues. After a disappointing budget execution in the first half of 2023, the government is planning a fiscal package to bring fiscal consolidation back on track, though the trajectory towards a 3.0% of GDP budget deficit is likely to be flatter. This should be agreed with the European Commission, and we stick to our baseline scenario that Romania will broadly achieve the milestones, both fiscal and structural reforms, to receive the RRF funds. The timing and structure of the fiscal consolidation package are likely to impact in the near term both GDP growth and the inflation outlook profile. Weaker-for-longer external demand, domestic uncertainties, and bottlenecks in accessing RRF funds are likely to extend the soft patch for the Romanian economy into the second half of this year. GDP growth should rebound to just above potential in 2024 on lagged effects from real wage growth. Core inflation is forecasted to remain stubbornly above the headline over the next couple of years, which, combined with a tight labor market and strong real wage growth, should delay NBR rate cuts vs. CEE peers. |
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General information
| Author | Erste Group Research |
| Date | 2023/09/08 |
| Language |  |
| Product name | CEE Country Macro Outlook |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | Romania |
| Currency in focus | Romanian Leu |
| Sector in focus | - |
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