Romania tightened its belt and suffocated the economy.

The Romanian economy has recently come under scrutiny as concerns about declining confidence and potential recession have been raised by the Chartered Financial Analysts Association of Romania (CFA Romania). According to data released this week, the association's Macroeconomic Confidence Index has reached its lowest levels since 2012, signaling a significant drop in economic optimism among financial analysts and professionals.

Adrian Codirlașu, president of CFA Romania, highlighted these developments during an interview with Agerpres. He noted that the index has seen similar declines in previous years, including 2018 when there were attempts to nationalize pension funds, and 2020 during the early stages of the pandemic. However, he emphasized that the current situation is particularly concerning because it reflects both a technical recession and a broader economic slowdown. The index dropped significantly in May, reaching 30.5 points, marking a decrease of 7.7 points compared to the previous month. This decline was accompanied by reductions in other indicators such as the Current Conditions Index, which fell to 23.4 points, and the Expectations Index, which dropped to 34 points.

Codirlașu explained that the decline in confidence is influenced by several factors, including external risks and internal challenges. These include the depreciation of the Romanian leu, high inflation expectations, and the overall economic uncertainty. He pointed out that the anticipated inflation rate over the next 12 months remains above 7 percent, indicating persistent pressure on prices despite efforts to stabilize the economy.

Inflation is linked to the country’s budgetary deficits, according to Codirlașu, who described this as a structural issue. He warned that while reducing the budget deficit could help mitigate inflation, doing so would require cutting government spending rather than increasing revenues, which could further strain the economy. The combination of high inflation and economic contraction, known as stagflation, presents a challenging scenario where traditional policy measures are less effective.

Looking ahead, the economic outlook appears bleak. Anticipated GDP growth for 2026 has fallen to -0.1 percent, suggesting a high risk of recession. Additionally, public debt is projected to rise to 61 percent of GDP within the next year. The average expected exchange rate for the euro against the leu stands at around 5.35 lei per euro, reflecting continued depreciation pressures.

Participants in the survey also expressed concerns about housing prices in urban areas. Approximately half of them expect a decline in residential property prices over the next year, while nearly two-thirds believe current prices are overvalued. These sentiments reflect broader economic anxieties and suggest that the real estate market might experience a correction in the near future.

The survey, conducted monthly by CFA Romania for over 14 years, provides valuable insights into the expectations of financial analysts regarding Romania's economic performance. It involves members of the association and candidates preparing for higher-level CFA exams, ensuring a broad representation of professional opinions.

As the economic landscape becomes increasingly uncertain, policymakers face the challenge of addressing both inflation and potential recession without exacerbating existing problems. With high inflation rates persisting and economic growth projections turning negative, the need for strategic fiscal policies becomes more pressing. The coming months will likely see increased focus on managing public finances and stabilizing the currency amid ongoing global uncertainties.