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Romania Economic growth will weaken in the near term, reflecting soft demand in the face of continued high inflation, elevated interest rates and subdued growth in trading partners. Recovery, beginning in the second half of this year, will be driven by strengthening household consumption, and foreign demand. The annual increase in output will be 2.6% in 2023 and 3.2% in 2024. The unemployment rate will decline in 2024 but remain above pre-pandemic levels. Consumer price inflation is expected to slow over the next eighteen months but continue to be above target. Monetary conditions have been significantly tightened and the policy rate should be held at its current level until inflation expectations are durably re-anchored. Fiscal consolidation will be modest in 2024. Longer term, a wider tax base is needed to fund spending on structural reforms, including in health and education while also ensuring fiscal sustainability. Reducing greenhouse gas emissions requires greater renewable energy investment and more energy-efficient buildings. Scope to bring greater numbers of women into employment remains substantial. Higher interest rates are tempering demand and cooling inflation Recent indicators point to a further decline in output growth in the near term. The post-COVID-19 catchup has ended, and price inflation and higher interest rates are damping demand. Preliminary information suggests GDP growth slowed in the first quarter to 0.1% (quarter on quarter). Meanwhile, however, an annual increase of 17.6% in the minimum wage came into force in January, bolstering household incomes and boosting aggregate demand and inflation. The consequent pressure on labour costs has likely weighed on employment growth. Headline inflation looks to have peaked; it was 11.4% in April having been over 16% in late 2022.
Romania
Source: OECD Economic Outlook 113 database. StatLink 2 https://stat.link/uxz3hk
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023