Romania's general government budget deficit will reach 8% of GDP in 2024, well above the 2023 figure and more than a percentage point above the government's target, Romania Journal reported.
The EC stresses that the higher-than-expected deficit reflects a very rapid increase in public spending, mainly due to large increases in public sector wages, spending on goods and services and social transfers, including pensions.
"In 2024, real GDP growth is expected to slow significantly to 1.4%. Buoyant private consumption supported domestic demand and imports, while export growth remained weak. A gradual recovery in external demand, easing financial conditions and resilient private consumption and investment will accelerate growth above 2% in 2025 and 2026. Headline inflation is projected to slow slightly but remain above 5% in 2024 as underlying price pressures are still high due to continued increases in disposable income. Strong labour demand will lead to a further reduction in unemployment. Romania's general government deficit is projected to reach 8% of GDP in 2024, much higher than in 2023. It is expected to remain broadly at this level in 2025 and 2026, assuming no change in current policy. The debt-to-GDP ratio is expected to rise to close to 60% in 2026," the economic forecast for Romania says.
The paper points out that Romania's GDP growth is expected to slow to 1.4% in 2024 due to weakening industrial dynamics, rising wages and high energy costs, despite strong retail sales driven by higher disposable incomes. At the same time, GDP growth is projected to recover to 2.5% in 2025 and 2.9% in 2026, supported by a recovery in external demand, private investment, sustainable consumption and EU-funded infrastructure projects. The EC also points out that strong domestic demand in Romania is boosting imports.
As regards the domestic labour market, the EU considers that pressures have eased, mainly reflecting the slowdown in economic activity and rising inflows of foreign workers.
Although Romania's general government deficit is expected to reach 8% of GDP in 2024, much higher than in 2023, the deficit is projected to remain high in the next two years.
General government debt is expected to rise from 48.9% of GDP in 2023 to almost 60% in 2026, reflecting the high deficit and slower nominal GDP growth in the coming years, the report concludes. | BGNES
