Romania Economic Forecast

Year-on-year GDP growth waned in the second quarter, coming in below market expectations. Pending the release of a full breakdown, weaker retail sales activity in the quarter likely signals subdued private consumption despite above-inflation wage growth. Slower merchandise exports growth also points to less supportive external demand. That said, a high base of comparison was also behind the annual deceleration, and a faster quarter-on-quarter expansion in Q2 shows robust underlying momentum. That said, available data for the current quarter suggests momentum has cooled somewhat, with economic sentiment declining in July. On the other hand, a further decrease in inflation in August could be positive news for household spending. Meanwhile, in mid-August, the government announced its intention to double the country’s monthly transit capacity for Ukrainian grain.

Inflation fell to 9.4% in July (June: 10.3%), marking the lowest reading since February 2022. Lower price pressures for food and non-food products more than offset a pick-up in services inflation. Inflation will continue to slow but remain high by year-end. Weaker demand and government intervention in energy and food markets will keep a lid on prices.