A few days ago, the Wall Street Journal surveyed several American economists about the economic outlook for 2024. The conclusion was that while the US economy will not experience a recession in 2024, there will be industries that will experience anemic growth as a recession. . Things are not very different in Romania either.

First of all, it must be said that there will be neither a hard nor a soft landing (according to the data we have at the moment) not in Romania. It will not be a landing at all; the plane descends and takes off again without touching the ground.

However, just like in an airplane, each passenger could experience landing and takeoff differently; some love and applaud, others feel bad.

In our case, workers from labor-intensive industries (“labor-intensive” are industries that require a large amount of work to produce their goods or services) are “applauding”, and here we mean HoReCa, food retail, construction, where an increase in staff is expected.

“At the opposite pole, we could see an increase in unemployment in energy, mining or agriculture in 2024,” he explains to HotNews. Catalin Ginararuscientist and labor market expert.

HotNews spoke to the chief economists of several local banks to find out the pulse of the economy and what lies ahead in this challenging year with 4 rounds of elections.

Do you think there will be a soft landing of the economy in Romania in 2024, a hard landing or no landing at all (the “plane” will approach the ground, but take off again)?

Ionuc Lianu, Chief Economist of CEC Bank: Romania’s economy slowed in 2023 due to a reduction in consumption caused by a deterioration in purchasing power. Real wages had a negative real rate in 2022 and started to turn positive in 2023, when we already saw growth of about 8% annually in the last quarter.

The return of purchasing power will be felt in 2024, and we are already seeing a pick-up in retail sales, which is a proxy (a pretty good approximation – n.red) for consumption. Thus, we already notice that from stagnation in August-September, retail sales in November increased by 3.7% annually. In addition to the increase in consumption, we expected the economy to gain momentum thanks to an increase in public and private investment, especially in the context of financing through European funds, as well as through public spending. We therefore expect economic growth to accelerate to around 3% in 2024, with 2023 being the weakest post-pandemic year.

Valentin Tetaru, Chief Economist of ING Bank: In 2024, we see economic growth picking up again, although it is likely to remain below potential. Specifically, we estimate real GDP growth of 2.8% in 2024, compared to the roughly 1.7% we estimate in 2023. To keep the spirit of the metaphor above, the plane landed in 2023 and took off again, not reaching optimal altitude, in 2024. .

Ciprian Dascalou, Chief Economist of BCR: We expect economic growth to accelerate slightly in 2024 to 3.3% annually from an estimate of 2.1% in 2023. Consumption will be the main driver of economic growth, supported by steady growth in real wages as inflation slows. Investment is expected to continue to play an important role in economic growth, albeit to a lesser extent than in 2023. There are still risks of a decline in external demand, at least in the first half of 2024.

Which sectors of the economy may shrink in 2024, and which may “take off”?

Ionuc Lianu, Chief Economist of CEC Bank: The retail trade sector may benefit from an increase in the purchasing power of the population in 2024, unlike in the last 2 years. Construction, especially infrastructure, is the star sector this year and the next 2 years as it receives European funding. The IT sector has seen a slowdown in 2023 and tax changes have put additional pressure on costs, however, given that they are an indispensable segment of the economy, IT services remain an important pillar of support, in addition to having the potential to be boosted by innovation that it gives an eternal impulse.

2023 was a weak year for the industry and the outlook remains bleak, with capacity utilization in the last quarter of 2023 at 67%, close to pandemic lows. Production backed by existing orders is taking around 5 months, compared with an average of 6.2 months in 2019 and 5.5 months in 2021-2022, according to surveys. German manufacturing, which provides traction for the sector, remains in recession territory, according to the IFO and Purchasing Managers’ Index (PMI).

Valentin Tetaru, Chief Economist of ING Bank: The main drivers of the economy in 2024 are likely to be public investment and private consumption. Public investment will continue to support the construction sector, especially in civil engineering. On the other hand, the prospects for accelerating private consumption are given by the growth of nominal wages at significantly higher rates than the projected inflation rate, which should lead to an increase in disposable income and expansion of consumption (with a positive impact in the retail trade sector).

We do not see the prospect of a significant reversal of the contractionary trend in industry, while transport is likely to suffer a mixed impact from anemic external demand, balanced by a recovery in domestic demand.

Ciprian Dascalou, Chief Economist of BCR: We expect sectors dependent on domestic demand to perform well this year, while sectors dependent on external demand with low margins and low labor will suffer, at least in the first half of the year. .

What level of economic growth is expected in 2024? What about the unemployment rate?

Ionuc Lianu, Chief Economist of CEC Bank: This year, the softening of the monetary policy is expected, which should contribute to the revival of the economy, although the consequences are delayed. A decrease in interest rates in the Eurozone is also forecast, which could mean higher growth rates compared to last year. Thus, the Romanian economy can also benefit from increased external demand. However, perhaps the most important element remains the use of available European funds, which can lead to a significant investment contribution to economic growth, the only element that can remove us from the slowing trend observed in all sectors, in a year in which global growth will have less ahead than last year, and global trade is threatened by new challenges in the supply chain, given the current geopolitical situation. We estimate economic growth at 3% and stagnant unemployment at 5.4%.

Valentin Tetaru, ex-head of ING Bank: We see economic growth accelerating to 2.8% in 2024, while the unemployment rate remains in the 5.0%-5.5% range for an even longer period of time.

Ciprian Dascalou, Chief Economist of BCR: Our estimates are 3.3% real GDP growth and 5.7% average unemployment.

Taking into account the geographical differences, as well as the high dispersion of indicators of different economic sectors, can economic growth of about 3% be perceived as a recession?

Ionuc Lianu, Chief Economist of CEC Bank: Romania’s potential economic growth is estimated at 3-4%, which means that the real growth rate of 3% is within acceptable parameters, especially against the background of falling inflation and unchanged unemployment.

Valentin Tetaru, ex-head of ING Bank: Economic growth, as a rule, is expressed directly in real terms. This means that it already takes average inflation into account. Therefore, average inflation of 6% and real growth of 3% would mean nominal growth of about 9.0%. Of course, at the sectoral level, inflation may differ from the average, and there may be sectors that are contracting despite overall positive economic growth.

What are the biggest economic risks you see for Romania in this election year?

Ionuts Lianu, Chief Economist of CEC Bank: In the context of attacks on commercial vessels in the Red Sea, there is a risk of re-acceleration of inflation worldwide, and implicitly in Romania. This will lead to the postponement of the expected easing of monetary policy.

Another important goal for 2024 is to achieve a budget deficit, at least a reduction compared to 2023, if meeting the 5% forecast will be difficult. The negative effects will still materialize in later years, when greater fiscal efforts will be needed to maintain the deficit on the desired trajectory.

Valentin Tetaru, ex-head of ING Bank: Leaving aside the external context, where many surprises may still happen, we believe that domestic risks arise mainly from how fiscal consolidation will play out, given the complex process of balancing investment spending, wages and pensions with achieving sufficient budget revenues without additional measures to increase taxes

“We see internal risks from the fiscal side and consumer confidence,” says BCR’s chief economist, Ciprian Dascalou