Romania Economic Outlook
After slowing in Q3, annual growth picked up in Q4, according to preliminary data. The full breakdown for Q4, due on 8 March, is likely to show solid performances in investment activity and private consumption on the back of EU funds inflows and accelerating annual retail sales growth, respectively. Turning to Q1 this year, annual growth is set to slow. Another rate hike from the NBR in January is likely putting additional downward pressure on activity, while a decline in economic sentiment and hiring intentions in January–February versus the Q4 average bodes poorly for growth. That said, a sharper-than-expected deceleration in January’s inflation print, coupled with minimum wage and pension increases introduced in the same month, will have supported private consumption somewhat.
Inflation fell to 15.1% in January (December: 16.4%), undershooting market expectations. A deceleration in non-food goods prices more than offset accelerating food and services prices. Inflation should return to single digits by Q3 2023 due to lower demand growth and the energy price cap, but the impact of these will be partially offset by minimum wage and pension hikes.