Romania's Q2 GDP growth forecasted by Erste Group to decelerate by 0.1% compared to the previous quarter
Romania's economic growth is expected to slow down in 2022, according to the latest projections from Erste Group and ING. The statistics office is set to announce flash Q2 GDP data on Thursday, August 14, which is anticipated to show a mild contraction of -0.1% q/q, and a potential annual decline of -1.8% y/y.
If the -1.8% y/y contraction in Q2 materialises, it would mark the first annual decline in several years for Romania's economy. However, it's important to note that a 0.25% y/y advance for the seasonally and workday adjusted GDP, if it occurs, would still be an advance, not a contraction, for the year.
Erste Group's initial forecast for Romania's GDP growth in 2022 was 0.3%, while ING projects only a 0.3% economic advance for the country. This indicates a lower growth rate compared to Erste Group's initial forecast for 2025, which was 1.8%. Erste Group revised its 2025 forecast down to 1.3% in June, and analysts' expectations for Romania's GDP growth have further depressed since then.
The current economic outlook for Romania's GDP for the rest of 2022 and beyond, according to Erste Group and ING, suggests moderate growth with some downside risks related to inflation and fiscal reforms. Erste Group forecasts inflation to remain elevated through 2025, at around 7.5%, with a core inflation rate of 6.5% year-on-year by the end of 2025.
Despite the ongoing economic expansion, growth is expected to stay below potential, and no interest rate cuts are expected until at least early 2026 due to inflation uncertainty. ING's forecast for the exchange rate by the end of 2025 is RON 5.100/EUR, implying room for currency fluctuations after the inflation peak.
For 2025 specifically, Romania's Q2 GDP growth was 0.3% year-on-year, below expectations of 0.6%, marking a slow but ongoing expansion. Erste Research also expects retail sales growth to slow down, with a 2.3% rise forecast for the full year 2025 due to high inflation and stagnant real wages. This slowing consumption is consistent with a GDP outlook showing restrained growth influenced by fiscal tightening and inflation pressures.
In summary, both Erste Group and ING foresee Romania's economic growth continuing but at a modest pace, constrained by inflation and fiscal reforms, with inflation remaining above target through the near term and no easing of monetary policy expected before 2026.
In the context of the economic projections, Romania's business sector may experience slow growth in 2022, as both Erste Group and ING anticipate an annual decline of -1.8% y/y in Q2 GDP. Furthermore, the finance sector may need to navigate potential risks related to inflation and fiscal reforms, as these factors could influence Romania's economic growth for the rest of 2022 and beyond.
