Medium-term forecast 2022-2026, autumn version

A. Considerations regarding medium-term estimates

In a difficult global context, with geopolitical conflicts at national borders and energy crises that amplified the pressures on the prices of raw materials, eroding at the same time the purchasing power of the population, the Romanian economy proved resilient beyond expectations to shocks on supply, achieving robust economic growth  in this year.

The autumn forecast scenario adjusted positively the current macroeconomic developments, but worsened the outlook for the next year, in line with the forecasts of international bodies for Romania’s main commercial partners, especially Germany and Italy.

The estimates for the year 2022 were substantiated based on the developments from January to August (the 5.7% economic growth from the first semester, the trends of sector indicators from July and August, price dynamics etc.), taking into account the prolongation of the conflict between Russia and Ukraine and the implications it has on the European and world economy.

Regarding the quarterly evolution, mitigation of dynamics was foreseen for the second part of the year, against the background of high prices, the impact of energy-intensive industrial branches and the transition into negative territory of the annual rate of real monthly wage earnings. However, the version of the current forecast can be considered a cautious one, as there are favourable premises that the decrease in the rate of private consumption in the last quarter will be compensated by the intensification of the investment process.

Overall, the economic growth was estimated at 4.6% in 2022, 1.1 percentage points above the level estimated in the summer forecast scenario (3.5%). Performances above expectations have been observed in the construction and services activities, which together contributed approximately 5 percentage points to the increase of the gross domestic product, thus mitigating the negative contribution of industry and agriculture (-0.9 percentage points).

For the tertiary sector, which is the growth driver, the gross value added was estimated to increase by 7.7%, with a slight tendency to slow down in the second part of the year, while for the construction sector a dynamic of 6.1% is foreseen, based on the acceleration of activity in the second semester. The negative contributions came from industry, for which was forecasted a 1.2% decrease in gross value added, and from the agriculture, strongly affected by the drought, which led to a significant revision of the previous estimates, to a decrease of 12.8%.

On the demand side, after a very good evolution in the first semester (5.0%), the expectations turned to a downward trend of private consumption dynamics in the following period, correlated with the evolution of purchasing power. Thus, the 5.4% increase predicted for the entire year 2022 was 1.9 percentage points above the previous estimate.

The Gross investments experienced a slight recovery in the second quarter of 2022, a trend that will continue as the public investments financed from EU funds (NRRP and the multiannual framework) accelerate. However, the revision of the growth of gross capital formation was modest (+0.6 percentage points), to 4.3%, with unfavourable influences from the equipment area.