Romania's economy sees rising optimism as political unrest decreases
Revamped Economic Analysis: Romania's 2025 Economic Outlook
Romania's Economic Sentiment Indicator (ESI) climbed to 103 in March 2025, a leap from 101.7 in February, indicating a continued recovery from January's subpar level, as suggested by Erste Group's research note. This positive trend stems from subsiding political uncertainty and issues, leading the group to predict a 2% projection for the year's economic growth.
However, this assessment might be premature, given the upcoming presidential elections in May and the anticipated shifts within the ruling coalition. These factors could potentially deliver market-adverse outcomes.
In response to the political turmoil and widening budget deficit in January-February (1.6% of GDP), rating agency Fitch issued a March 25 note, changing to negative their outlook on Romania's fragile sovereign rating. The agency had affirmed its assessment in January, highlighting the implications of the presidential elections, coalition sustainability, and the capacity to implement fiscal consolidation.
Acting president Ilie Bolojan expressed concerns about Romania's stagnating economy in an interview, although no supporting data was provided. Economy-wise, Romania has been at a standstill and needs urgent action to avoid recession.
Erste Group expects Romania's economic growth at 2.0% in 2025, acknowledging the increased downside risks because the fiscal impulse may soon turn negative, aiming to meet the budget deficit target.
Romania's Macroeconomic Confidence Indicator, measured by the CFA Romania Association, shrank by 3.8 points in February to 36.6 points, lingering below the neutral 50-point mark on the 0-100 scale. CFA analysts foresee a 1.1% growth rate for this year's economy.
A closer examination reveals that the ESI's growth is mainly driven by the robust service sector, particularly retail, while consumer confidence is plunging into more negative territory. Manufacturing confidence has shown some improvement, but sentiment in the construction sector remains negative.
Manufacturing: Confidence rose to -0.1 in March from -1.1 in February due to increased production expectations and higher order books.
Services: Sentiment escalated to 7.4 in March from 5.0 in February, bolstered by better past business, past demand, and anticipated future demand.
Consumer Confidence: Slightly declined to -17.2 in March from -17 in February due to a more pessimistic view of the past financial situation and future economic prospects.
Retail Trade: Confidence climbed to 11.5 in March compared to 8.7 the previous month, fueled by stronger past activity and falling inventories.
Construction: Confidence increased to -7.1 in March from -7.6 in February.
As we navigate through this evolving economic landscape, it is essential to consider the potential impact of the 2025 Romanian presidential elections and further political developments on investor confidence, coalition government sustainability, and fiscal consolidation efforts.
iulian@our website
(Photo source: Ifeelstock/Dreamstime.com)
1. The 2025 economic outlook for Romania suggests a continued recovery, as indicated by the Economic Sentiment Indicator climbing to 103 in March, driven primarily by the robust service sector like retail.2. Despite the optimistic business outlook, the upcoming Romanian presidential elections in May and potential shifts within the ruling coalition could deliver market-adverse outcomes, as the fiscal outlook remains uncertain.3. Fitch, the rating agency, issued a note on March 25, changing to negative their outlook on Romania's fragile sovereign rating due to political turmoil and a widening budget deficit in January-February.4. To avoid a potential recession, Romania's economy needs urgent action, while investor confidence, coalition government sustainability, and fiscal consolidation efforts are crucial factors to consider in the general news and political landscape.
