EME Macro/Strategy: Romania – growth ok, loose fiscal stance with attractive yields

Romania is not immune to a stagnant Eurozone, but continues to show greater growth resilience than most of its European peers. The growth composition has leaned towards investment and away from consumption, but this is set to reverse next year, lifting growth to 2.5%, from 1.8% this year. As we approach the election year, much of the volatility has been concentrated in politics and policy prospects, with the finalisation of the 2024E budget still pending. Inflation is on a gradual declining path, which should create some room for monetary easing from July, at the earliest, but a drop back to the 2.5% target is not in sight until 2026E. Given this, we expect the NBR to cut by a limited 100bps, to 6.00%, next year, but smoothly, by 225bps, to 3.75% by end-2025E. This implies that the 10-year yields will likely trade sideways, at 7-7.5%, next year, which makes, in our view, for an attractive investment, given the stable currency and an increasing number of European households increasingly focused on reallocating savings into higher-yielding products.