Banca Transilvania: Romania’s private consumption to recover in 2024 as inflation eases

The private consumption in Romania will recover to 4.8% annual growth rates in 2024-2025 after the temporary slowdown to 2.9% this year (from 5.5% in 2022), according to Banca Transilvania’s chief economist Eugen Radulescu, quoted by Ziarul Financiar.

The consumption dynamic is put in the context of consumer prices expected to stabilise gradually over the coming years after the particularly high inflation in 2022.

The updated forecast was issued after the retail sales posted in April the worst performance since 2020.

The weak sales in April were primarily caused by persistent inflation weakening households’ disposable incomes, and by slightly higher unemployment, Radulescu argues. In the longer term, the headline inflation under the EU’s harmonised definition HICP is seen by Banca Transnilvania’s chief economist as easing to 4.4% in 2024 on average from 9.3% this year.

Banca Transilvania’s scenario is close to that of the state forecasting body CNP, which expects 2.7% private consumption growth this year, in line with the moderate 2.8% GDP growth forecast issued in May.

Consumption is seen as bottoming out to 4.8% next year and 4.9% in 2025. At the same time, headline inflation (under the national definition CPI) is seen as slowing down to 5.4% next year from 10.7% this year.

(Photo source: Banca Transilvania)