IMF lowers Romania's 2024 growth forecast to 1.9%

The International Monetary Fund (IMF) has revised its growth forecast for Romania's economy in 2024, lowering its estimate from 2.8% to 1.9%, according to the latest World Economic Outlook (WEO) report. This projection, still optimistic, contrasts with Romania's GDP growth of only 0.7% y/y in the first half of 2024 and the likelihood of weaker performance in the second half due to adverse base effects.

The IMF report anticipates a rebound for Romania in 2025, forecasting growth of 3.3%.

However, the government's own medium-term fiscal-structural plan, recently submitted in Brussels, projects economic growth of 2.7% for both 2024 and 2025.

On a global scale, the IMF maintained its 2024 forecast for economic growth at 3.2% but lowered its 2025 projection to the same level, citing expected slowdowns in major emerging economies.

Pierre-Olivier Gourinchas, the IMF's chief economist, warned that risks have intensified, particularly due to geopolitical tensions and economic fragmentation, which could drive up energy prices.

Romania's current account deficit is set to widen this year, with the IMF now forecasting a deficit of 7.5% of GDP, up from its April projection of 7.1%. The deficit is expected to reduce gradually, reaching 7% in 2025 and 5.9% by 2029, although it will remain elevated in absolute terms.

Inflation in Romania, which spiked to 10.4% in 2023, is expected to moderate, with the IMF projecting an average annual increase of 5.3% in 2024 and 3.6% in 2025. This represents a slight improvement on the IMF's earlier forecast in April, which predicted inflation of 6% in 2024 and 4% in 2025.

Unemployment is expected to remain stable at 5.6% in 2024, with a modest decline to 5.4% in 2025, according to the IMF's latest estimates.

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