Romania's Inflation Outlook for 2025: Analysts' Predictions and Factors
Policy rate adjustments postponed amid domestic and foreign apprehensions in Romania
Got your curiosity stirred about Romania's inflation figures in 2025? Here's a lowdown on what various analysts have to say on the topic.
Romania's finance eagles have unanimously decided against any rate cuts during the National Bank of Romania (BNR) monetary board meeting on April 7, but expect a 50-75 basis points (bp) trim by year-end, depending on fiscal policy, economic activity dynamics, and trade protectionism.
Since the central bank chopped 1% off the monetary policy rate after the war in Ukraine’s inflationary peak (taking it from 7% to 6.5%), it has remained consistent whilst consumer price inflation has bobbed around the 5% mark over the same period. Core inflation recently demolished down to the same 5% level, as of February.
But wait! Danger lurks high, and some analysts' expectations for price cuts by the end of the year seem somewhat disparate due to towering internal and external risks, March inflation figures surpassing BNR's 4.6% y/y target, and unpredictable fiscal policy.
BNR's chief analyst, Ciprian Dascalu, posits headline inflation to settle at 3.7% by December 2025, speaking for Economica. ING Romania's chief economist, Valentin Tataru, however, expects 5.2% average inflation for the entire year – a step down from 5.6% in 2024 but still hovering above 5% y/y rates since June 2024.
On the fiscal front, the 1.6%-of-GDP deficit in Jan-Feb has sparked worries of a full-year deficit reaching 9%-of-GDP, if no significant action is taken following the May presidential elections. The solution could involve a 2-3 percentage points (pp) VAT rate cut or a substantial tax rate hike.
Scale back on the external front, protectionist measures imposed by the US yield indirect effects that affect Romania's exports, imported inflation, and the stance of other central banks. These factors demand a cautious monetary policy stance.
According to economists, twin deficits represent an essential constraint on monetary policy. ING Romania expects policymakers to refrain from tinkering with rates or loosening their foreign exchange grip until the winds of uncertainty dissipate and the actions of other key central banks like the Fed, ECB, and the National Bank of Poland unfold as anticipated.
Tataru points out that data due on April 11 could justify a timid monetary policy stance, considering predictions of inflation reaching 4.9% – significantly above the central bank's estimate of 4.6%. Across the board, inflation in 2025 appears shaky, exposed to fiscal, energy, and geopolitical developments, according to Tataru.
Erste Bank Group goes a step further, anticipating three 25bp rate slices by year-end, contingent upon fiscal and political developments. Balancing acts – they're a necessary evil in the world of inflation predictions!
Selected Insights from Enrichment Data
- KBC Bank: Anticipates an average inflation rate of 4.5% for Romania in 2025.
- Trading Economics: Predicts a decline to 4.0% by the end of Q1 2025.
- IMF: Forecasts an average inflation rate of 4.6% for 2025, noting a decline from 5.6% in 2024.
- National Bank of Romania: Revised forecast upward to 3.8% by the end of 2025.
In light of the revised forecast by the National Bank of Romania, other financial institutions and analysts have offered their predictions for Romania's inflation rate in 2025. KBC Bank anticipates an average inflation rate of 4.5%. Trading Economics predicts a decline to 4.0% by the end of Q1 2025. The International Monetary Fund forecasts an average inflation rate of 4.6% for 2025, noting a decline from 5.6% in 2024.
