Romania's ING anticipates temporary price increases and cautions about potential risk of economic recession.
Romania is navigating a complex economic landscape, with projected inflation rates and GDP growth for the coming years. Analysts predict that inflation will rise in 2025 before decreasing in 2026, while GDP growth is expected to be moderate.
According to various analysts, inflation is expected to reach 6.2% by the end of 2025, driven by higher VAT and other tax increases starting in August. ING forecasts a slightly lower rate of 6.0% by year-end, while Erste Bank projects a higher inflation rate of 7.5% by the end of 2025, largely due to a moderate increase in electricity prices. For 2026, inflation is expected to decrease to around 4.3% by December, according to ING, while Trading Economics' models project inflation to trend around 3.40% for the year.
Romania's GDP growth is projected to be 1.3% in 2025 and 2.2% in 2026, according to analysts. Higher inflation could lead to reduced consumer spending power and potentially slow economic growth unless countered by fiscal policies or monetary adjustments.
The National Bank of Romania (NBR) has maintained its key interest rate at 6.50%. Analysts expect no changes in the interest rate for 2025, but there may be a slight reduction by the end of the year or early 2026. Erste Bank predicts a total of 150 basis points in rate cuts throughout 2026. The central bank's policy decisions will be influenced by the fiscal consolidation package and its impact on inflation and economic stability.
Consumer confidence has visibly deteriorated since the beginning of the year amid expectations of rising unemployment. Stefan Posea, economist at ING Romania, warns that the consumption impulse has likely passed its peak. High base factors are expected to bring consumer price inflation down to 4.0-4.5% y/y by the end of 2026.
The government is set to implement measures that may impact household purchasing power, such as a higher VAT rate and excise duties starting in August. These dynamics could push the year's GDP growth even closer to stagnation. A scenario of annual growth of 0.3% in 2025 is now more plausible than a forecast of 0.8%.
Households are expected to take a more cautious position in the coming months due to economic developments. The BNR will hold a new monetary policy meeting on July 8. Consumer price inflation is projected to rise to 7.5%-8.0% y/y in the coming months and stabilize around 7.5% by the end of the year. Additional reforms to be announced in July could add new risks to the evolution of demand. The BNR's prudent position is likely influenced by the economic developments and the government's measures. Public salaries and pensions will not be indexed in 2026, which could lead to trends of cautious saving. No new information about the GDP growth or the risk of stagnation or recession was provided in this paragraph.
The increasing inflation rates and taxes, such as the higher VAT and excise duties, might lead to a decrease in consumer spending power and potentially slow down the expected moderate GDP growth in business and industry sectors. These factors could potentially push Romania's GDP growth even closer to stagnation, as warned by some analysts in the field of general-news and politics.
With consumer confidence dwindling due to economic developments and the government's measures, households are expected to take a more cautious position in their spending, which could affect various sectors like finance and business. This conservative approach could be further influenced by the central bank's interest rate decisions and any additional reforms announced in the near future, as outlined in the general-news and politics landscapes.
