Economic growth of 2.2%, deficit of 6.3%

Our country will register at the end of 2023 an economic growth of 2.2% and a budget deficit of 6.3% of the Gross Domestic Product, the European Commission estimates in the forecast published yesterday by the institution from Brussels.

The European Commission has revised downwards the estimates regarding the growth of the Romanian economy this year, from 3.2% as it anticipated in May, to 2.2%, due to the high inflation that limits real disposable incomes, the tightening of financial conditions and demand external, according to the autumn economic forecasts published on Wednesday by the community executive.

According to the new forecasts, the Romanian economy would register a growth of 2.2% in 2023 and 3.1% in 2024, less than the advance of 3.2% in 2023 and 3.5% in 2024, respectively, according to the forecasts economic spring.

The European Commission's report specifies: "Real GDP growth is forecast to accelerate to 3.1% in 2024 and 3.4% in 2025, supported by solid increases in disposable incomes, the lessening of the impact of interest rate hikes and resilience consumption and public investment. While private consumption is expected to slow, investment will remain the main contributor to GDP growth over the forecast horizon."

As for the deficit, the European Commission's autumn forecast estimates that it is likely to reach 6.3% of GDP in 2023, the same level as in 2022. In this case, this is a significant upward revision. compared to the deficit of 4.7% of GDP foreseen in the spring forecast. The community executive expects the government deficit to be reduced to 5.3% in 2024 and 5.1% in 2025, as a result of fiscal consolidation measures to be implemented in January 2024.

The quoted document shows: "The deficit-reduction effect of the fiscal consolidation package would be partially countered by a robust increase in personnel expenses. The forecast also does not include the potential short-term cost of the pension reform that is currently being prepared."

Regarding inflation, the European Commission estimates that with core inflation being resilient and above headline inflation in 2023, the downward trend in headline inflation will only gain momentum in 2024 and 2025, when it could re-enter the forecast target range by the National Bank of Romania. For the current year, Brussels officials expect a modest decrease in inflation in our country, to 9.8%, from an average of 12% in 2022, to decrease to 5.9% in 2024 and 3.4 % in 2025.

The European Commission publishes each year two sets of detailed forecasts (in spring and autumn) and two sets of intermediate forecasts (in winter and summer). Interim forecasts include annual and quarterly GDP and inflation figures for all Member States for the current year and the year ahead, as well as aggregated data for the EU and the euro area.