Romanian economy heading towards stagflation

Romania is heading for a period of economic stagnation and a further rise in inflation, a potential scenario, known as stagflation, which causes companies to secure their businesses, in line with the declining appetite for investment and consumption, according to the Moneycorp Barometer.

The survey, conducted by Moneycorp and the consulting firm Frames, indicates that 46.7% of businesspeople, managers and executives in the surveyed companies, partners of Moneycorp, estimate that by the end of the year, Romania could enter stagflation, 26.7% of them see an even more pessimistic scenario, considering that macroeconomic projections indicate the onset of a recession. Only 20% of companies are optimistic and see further economic growth.

According to estimates, 33.3% of managers surveyed believe that inflation in Romania will be range between 14 -17% this year, while 26.5% see inflation above this threshold, somewhere between 18-20%. 13.3% estimate inflation at over 20% and only 26.9% believe that inflation will remain below 14% by the end of the year.

Most companies have transferred rising prices in utilities, materials and services to the end consumer, according to the Moneycorp Barometer. In 2022, this mechanism of transferring foreign exchange risk to the consumer, combined with rising prices as a result of inflation, is likely to significantly affect the companies’ level of competitiveness and sales.

Most of the executives surveyed (33.3%) see a stabilization of risk factors such as inflation and rising interest rates only in the second half of next year, while 26.7% are even more pessimistic, indicating a first positive signal on this area only in the first semester of 2024.

Beyond the measures taken by the National Bank, the respondents in the Moneycorp barometer see a significant role in the public policies applied by the Government. Asked what measures the state should take to balance the economic situation, to limit the budget deficit, most of the managers (33%) indicated „Restructuring the number of civil servants and digitization” as the main decisions needed in the current context.

Ranking next, in the order of importance indicated by those surveyed, were the increase in the collection of taxes and duties (26%), the elimination of fiscal facilities offered in construction, IT, agriculture and other fields (15%), the change of the fiscal system. (progressive tax) -13% and ensuring a fair and transparent use of funds from the National Recovery and Resilience Plan (PNRR) and Anghel Saligny (12%).

The survey carried out by Moneycorp and the consulting firm Frames was conducted between May 27-31, 2022, on a group of over 825 companies in various fields, such as IT&C, Insurance, Equipment, Raw Materials, Energy, FMGC or Tourism. The profile of the respondents was represented by middle and top management, with higher education, 63% men and 37% women, aged on average 41 years.

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