RO: Muddling through

The Romanian economy was barely above water in 2024. This was in spite of 13.4% nominal wage growth vs 5.6% average inflation. This brings into question the consumption-driven model which seems to back-fire.

We forecast 2025 GDP growth at 2.0% with downside risks subject to fiscal outlook helped by carry-over and base effect. Consumption growth, which was the main growth driver, well, it is gone, consumer confidence collapsed in January.

The budget bill includes hefty state investments which are relying on EU funds. Without state investments, subpar growth for the second year in a row could become a baseline scenario.

All in all, the income convergence story seems to be stalled, at best, without structural reforms, as it was running on excess fiscal deficits.

Breakdown data is due 7 March. We expect weaker household consumption translating into lower negative net export contribution.

The government net spending was 3.2pp of GDP in the last quarter of 2024. The result was 0.8% q/q real GDP growth.