The National Strategy and Forecasting Commission has revised downwards its inflation estimate for the end of this year to 7.4% from 8%, amid a larger-than-expected drop in international oil and energy commodity prices.

“A wider decline in international quotations for oil, as well as energy commodities, than previously expected, has led to a downward correction, noticeable, in particular, for inflation from the end of 2023. Thus, the estimate of consumer price growth in December 2023 compared to December 2022 was reduced by 0.6 percentage points, from 8.0% to 7.4% (the change in the average annual indicator is insignificant, by 0.1 percentage points ) In the long term, the forecasts are maintained, with the exception of 2024, where the statistical effects of the received amendments are for the current year,” says the Medium-term forecast 2023-2026, spring version.

According to estimates, the current account deficit will be corrected in the current year by 0.4 percentage points, mainly as a result of a reduction in the deficit of the commercial balance of goods, as well as an increase in the active balance of the balance of services.

The spring scenario keeps unchanged the estimates of the autumn version of 2022 and the winter version of 2023 regarding the evolution of the gross domestic product, making downward adjustments to inflation for the current year and at the level of the next year.

According to the CNSP, economic growth forecast for 2023 of 2.8% is considered reasonable against a background of still high inflation, but with a favorable background driven by the good behavior of services, which could subsequently lead to an improvement in valuation.

Overall, construction and services will show the current year revised upward from the previous forecast (+0.8 and +0.4 percentage points respectively), but their positive contribution will be reduced by the industry affected by dysfunctions in supply chains and moderate external demand.

“It should be noted the dynamism of construction works, for which a 7% increase in GVA (gross added value, no) is predicted, which is supported, in particular, by the engineering and construction component, stimulated by the development of European funds. For agriculture, it is predicted, under favorable climatic conditions for this sector, an increase of 10.6%, after production was significantly reduced in the previous year due to soil drought,” the document quoted by Agerpres said.

On the other hand, industrial activity will decline under the influence of still high electricity and gas prices, with energy-intensive industries also seeing a reduction in activity this year. In this context, there was a negative revision of the previous forecast by 0.8 percentage points, respectively from an increase of 0.6% to a decrease of 0.2% under the current scenario.

On the demand side, private consumption will have moderate dynamics (+2.7%), which is in line with previous estimates, given that the inflationary effect will be more intense in the first half of the year. In terms of gross accumulation of fixed capital, taking into account the dynamics of construction work, the growth rate has been increased to 6.8% (+0.6 percentage points compared to the winter forecast of 2023). Thus, the level of investment will reach 25.5% of GDP, providing the prerequisites for the transition to a new evolutionary model based on investment, comments the CNSP.

In the medium term, the annual growth rate of gross domestic product is estimated at 4.8% in the period 2024-2026, with a peak in 2025 of 5%.

On the supply side, the industrial sector is expected to enter a recovery process after the shocks subside, with an average annual growth of 4.4%.

“The most effective attraction and use of European funds from PNRR and the multi-year financial program will make construction the most dynamic sector with an average annual growth of 9.2% and one of the main pillars of economic development. an average annual growth of 4.6% is expected for services, and areas with high added value will play a significant role in their development,” says the forecast published by the specialized institution.

On the demand side, the gross accumulation of fixed capital (+8.4%) will be the main factor in boosting economic activity, given the acceleration of public and private investments in priority areas, with financing from the PNRR. The result materializes in a significant improvement in the level of investment (more than 25% of GDP). At the same time, private consumption is expected to grow at a lower rate (+4.7%) than gross domestic product.

Net exports will maintain a negative contribution throughout the forecast period, recording a gradual downward trend to 0.5 percentage points in 2026.

According to the CNSP, risks have become more balanced in recent months, but uncertainty caused by a tense geopolitical situation makes the medium-term outlook vulnerable as the global economy adjusts after the turmoil of 2020-2022 and recent turmoil in the financial sector. . Recession fears still prevail, and inflation may prove more resilient than expected, prompting further tightening of monetary policy.

“An escalation of the war in Ukraine could trigger a renewed energy crisis in Europe, although the risk of energy supply is low. The possible segmentation of financial, commercial and commodity markets in regional blocs could lead to a new wave of production disruptions and high prices for goods traded around the world, with global spillover effects through supply chains,” the spring forecast states.