Erste Research: price-wage spiral to keep Romania's growth high in 2024-2025

The tight labour market creates a price-wage spiral that is pushing up consumption and stimulating economic growth to the highest levels in the region, according to an Erste Group Research (EGR) report. Thus, Romania's economy will rise by 3.3% in 2024 – the highest rate in the region, at par with Serbia's, and by 4.8% in 2025 - the highest rate in the region (followed by Serbia, with 3.6%).

The decline of the Grman economy, with a negative impact across the whole region, and the fiscal consolidation efforts will be balanced in terms of GDP growth in Romania by the positive impact of the Resilience Facility funds.

"The difficult election year in 2024, with European, local, parliamentary and presidential elections on the schedule, will trigger certain populist noises. Polls point to continuity of the grand coalition now and beyond 2024," says the EGR report, quoted by Cursdeguvernare.ro.

On the downside, however, Erste Bank Research analysts point out that consumption accounts for the highest part of the GDP utilisation: 80%. Romania's problem is that the consumption advance is based on imports, which also puts pressure on the trade balance and the current account deficit.

Romania will continue to record the largest budget deficit in the region, and EGR analysts add salt to the wound by comparing its data with the US deficit, which is, of course, in a completely different global position.

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