The consumer price inflation will rise to 7.5%-8.0% y/y in the coming months to stabilise around 7.5% by the end of the year, but high base factors will bring it down in the region of 4.0-4.5% y/y by the end of 2026, according to the projections expressed by ING Romania economist Stefan Posea, as quoted by Cursdeguvernare.ro.
Posea also warns that the consumption impulse seems to have passed its peak, but also that consumer confidence has visibly deteriorated since the beginning of the year amid expectations of rising unemployment.
At the same time, the elimination of indexation of public salaries and pensions in 2026 will contribute to the trends of “cautious saving, which will likely continue in the coming quarters.” Additional reforms to be announced in July, aimed at broader optimizations in the public sector, add new risks to the evolution of demand.
“These dynamics could push this year’s GDP growth even closer to stagnation. If the economy stagnates quarterly for the rest of the year, annual growth could fall to just 0.3% in 2025 – a scenario that now seems more plausible than our already below-consensus forecast of 0.8%. Given the current trajectory, the risk that the economy will slip into a mild recession or even register an annual contraction cannot be completely ruled out,” Poșea writes.
In his opinion, these developments will determine the leadership of the National Bank of Romania (BNR) to adopt a prudent position and maintain the key monetary policy interest rate at the current level of 6.5%, at least until the first quarter of 2026. The BNR holds a new monetary policy meeting on July 8.
The pattern is likely to remain in place in June and the months to follow as households take a more cautious position and the government implements measures with a direct impact on their purchasing power: a higher VAT rate and excise duties as of August and no public wage and pension hikes in 2026.
iulian@romania-insider.com
(Photo source: Oleg Kachura/Dreamstime.com)
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