Romania’s forecasting body, CNP, revised its forecast for the year’s GDP growth to 0.6% from 1.4%, under the Autumn Forecast dated September 5, to be used as the baseline scenario for the imminent budget revision. Initially, the government drafted the budget planning for this year based on a much brighter macroeconomic scenario inked last December and including a 2.5% GDP growth this year.
This compares to the slightly optimistic 1.3% growth projected by Erste Group and the much more pessimistic 0.3% projection affirmed by ING Romania.
The revised outlook reflects weaker income dynamics and subdued private and government consumption. Private consumption would rise by only 1.1% and government consumption would drop by 2.1% in 2025, representing a sharp negative revision compared to the previous scenarios.
CNP will publish the next update on the macroeconomic outlook, to be used for the 2026 budget planning, in November.
In nominal terms, however, the revised forecast envisages a GDP close to that projected last December – RON 1.9 trillion. Higher GDP deflator (7.4% under the revised scenario compared to 5.8% initially projected last December) compensates for the lower real GDP advance.
CNP now expects the economic growth to double next year, to 1.2%, which is a significant downward revision from 2.4% under the May 14 Spring Forecast and 3.0% Autumn Forecast drafted last December.
The revised forecast, combined with the actual GDP increase in H1, indicates a sudden decrease in the seasonally and workday-adjusted GDP in the second half of the year. Among the possible scenarios, the 0.6% y/y overall growth in 2025 is consistent with a 1.8% q/q contraction in Q3 followed by flat q/q dynamics in Q4.
In annual terms (y/y growth), this would mean 0% y/y growth in Q3 and marginal y/y contraction in Q4 – under the chain-linked volume methodology used by Eurostat, as opposed to the previous-year-prices (PYP) deprecated methodology still in use by the Romanian statistics office. This marginal y/y contraction in H2 would follow a 1.5% y/y advance in H1.
Under PYP methodology, the annual (y/y) growth would remain positive and even strengthen in H2, from 0.3% y/y in H1.
The revised GDP forecast includes (is based on) assumptions about a much weaker advance of the households’ incomes and consequently private demand. The government consumption is revised downward as well.
Specifically, the average net wage is expected to contract by 0.4% y/y in 2025. Based on the dynamics of the real wages in H1 (+3.6% y/y), this means roughly 4% y/y contraction in the real average net wage in H2. Namely, the wages should remain in nominal terms at the level of June 2025 (and no year-end bonuses) – which was expected for the budgetary sector but not necessarily for the private sector.
iulian@romania-insider.com
(Photo source: Diony Teixeira/Dreamstime.com)
Leave a Reply