The annual inflation rate was maintained in April 2025 at 4.85 per cent (4.86 per cent in March) and increased in May to 5.45 per cent. The advance compared to the end of the first quarter of 2025 is the result of the continued acceleration in food and energy price growth, which consistently outpaced in terms of impact the new declines in momentum recorded in the fuel and tobacco products segments and in the non-food sub-component of core inflation, according to BNR report.
In turn, the annual rate of adjusted CORE2 inflation resumed its downward trend, rising to 5.4 per cent in May from 5.2 per cent in March, as the influences from disinflationary base effects and the fall in import price dynamics were more than offset in this period by those stemming from the rise in the prices of some agri-food commodities and the gradual pass-through of high labour costs to consumer prices, as well as from the increase in short-term inflationary expectations and the leu/euro exchange rate.
The annual rate of inflation calculated on the basis of the harmonised index of consumer prices (HICP – the inflation indicator for EU Member States) rose to 5.4 per cent in May 2025 from 5.1 per cent in March 2025, while the average annual rate of CPI inflation fell to 5.0 per cent in May from 5.1 per cent in March 2025. In turn, the average annual rate of HICP inflation declined to 5.2 per cent in May 2025 from 5.4 per cent in March 2024.
Economic activity stagnated in the first quarter of 2025, after growing by 0.5 per cent in the previous three months (quarter-on-quarter change), a development that makes it likely that the aggregate demand deficit will open up more clearly in this interval than anticipated.
Compared with the same period last year, GDP growth slowed further in Q1 2025 to 0.3 per cent, from 0.5 per cent in the last quarter of 2024. Domestic demand, however, continued to accelerate its growth in annual terms, mainly on the back of the dynamics of gross fixed capital formation, which jumped, consistently returning to positive territory, while household consumption slowed considerably but remained the main driver of GDP growth.
By contrast, net export developments also significantly increased their contractionary impact in the first quarter of this year, as the negative gap between the annual dynamics of the volume of exports of goods and services and imports widened further, with the latter increasing somewhat more markedly than in the previous quarter. As a result, the trade deficit accelerated sharply compared to the same period last year, while the current account deficit maintained its high annual growth rate.
The latest data and analyses point to a moderate quarter-on-quarter growth of the economy in the second quarter of 2025, in line with previous forecasts, amid heterogeneous developments in aggregate demand components and major sectors compared with the same period a year earlier.
Thus, in April 2025, retail sales continued to decelerate in annualised terms, while services supplied to households largely recovered the decline recorded in the previous quarter. The annual dynamics of the volume of construction works returned very slightly into negative territory, but industrial production contracted sharply compared with the same period a year earlier. At the same time, the annual change in exports of goods and services declined more sharply relative to Q1 2025 than the annual change in imports, so that the annual growth of the trade deficit remained particularly alert in April, as did the current account deficit, which nevertheless moderated noticeably.
On the labour market, the new data show decreases in the number of employees in the economy in March and April 2025, as well as a fall in the BIM (International Labour Office) unemployment rate for the April-May period as a whole, after it had climbed to 6 percent in the first quarter. At the same time, according to specialised surveys for the second quarter, hiring intentions in the very short term remained on average at the increasing level of the previous three months, while labour shortages reported by companies declined significantly. The annual dynamics of nominal gross wages, however, continued to decline relatively slowly in April 2025, remaining in the double-digit range, while that of unit labour costs in industry jumped again at the start of the second quarter to 21.8 per cent.
Financial market conditions tended to normalise in the second half of the second quarter, as the domestic political environment eased after the end of the electoral calendar and discussions on the formation of the new governing coalition and the shape of the fiscal stimulus package progressed, easing financial investors’ concerns about the prospect of fiscal consolidation. Thus, the main interbank money market rates recorded small declines, but still remained significantly above their April levels, while long-term government bond yields corrected relatively quickly and fully the steep increases recorded in the first ten days of May. At the same time, the exchange rate between the leu and the euro was on a downward trajectory and declined slightly in the first part of June, but subsequently returned to the values reached towards the end of the previous month. Against the US dollar, the leu strengthened significantly, fully recovering the loss of value in the first part of May, given the resumption of the general weakening trend of the US currency on international financial markets.
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