WOOD Flash – Romania macro: stronger than most, rates heading slightly higher than thought previously

Romania is likely to outperform its peers thanks to its better position with regards to energy sources and the overall buoyant liquidity conditions across the economy, but at a higher cost than before. Romania has received both tranches of the recovery fund programme this year, and is moving ahead with securing support for the green and digital transition. Thus, we expect real GDP growth to expand by 0.5% in 2023E, with upside risks, and move up the peak of the interest rate cycle to 8.50%, to be reached spring next year. We flag some contained, further upside risk to local bond yields, before a sustained downturn materialises by the summer of next year. On the political front, the approval ratings of the ruling parties PNL and PSD are stable and conducive to political continuity. We underscore that although the 2023 fiscal code was approved without a solidarity tax on large companies, this remains an important point for the head of PSD and, thus, the risk of an eventual introduction probably remains.