Key Macroeconomic Trends to Watch in 2025
Market volatility will remain high
Central banks are adjusting their monetary policies based on economic indicators such as inflation, economic growth, and employment, rather than on a fixed schedule. While this approach appears positive, it also brings high volatility to the currency market, which can lead to sharp exchange rate fluctuations, complicating companies' financial planning and forecasting. Analysts also predict that interest rate cuts in 2025 will be more moderate than in previous easing cycles, as the absence of a recession does not require drastic measures.
Attacks on international trade are on the rise
Free trade is increasingly impacted by protectionist policies, economic boycotts, and obstacles in securing essential trade routes. Approximately one-third of the world's countries, including 60% of developing nations, are under economic sanctions imposed by the United States—an unprecedented level. Blockages in key trade points, such as the Formosa Strait, where China and Taiwan are in conflict, or the Bab El Mandeb Strait in the Red Sea, affected by regional conflicts, pose major risks to global economic growth.
To mitigate these challenges, companies can diversify their trading partners and enhance their internal expertise in managing geopolitical risks.
Euro area grows slowly but developed economies not at risk of recession
The Eurozone is experiencing modest growth, around 1%, due to limited flexibility in monetary policy and stagnation in Germany, a pillar of the European economy and Romania's main trading partner. This situation could negatively impact exports and demand for Romanian products in European markets. However, analysts consider a recession in developed economies unlikely, as real wage growth, the gradual easing of restrictive monetary policies, and expansionary fiscal policies, particularly in the U.S., support global economic activity. The U.S. is expected to outpace global growth rates in the coming years.
Romania risks a negative ratings outlook due to its high budget deficit
Romania faces challenging budget negotiations with the European Union. Considering the budget deficit of approximately 7% of GDP and the beginning of the excessive deficit procedure, Romania will have to present a seven-year fiscal adjustment program, which could impact economic growth. However, the European Commission may allow it to continue with investment plans for 2025-26. Furthermore, while a sovereign rating downgrade is unlikely, a negative outlook could be applied. In the short term, Romania's economy appears stable, but stricter fiscal measures will be necessary in the long term to avoid austerity.
"In 2025, as volatility persists and global protectionism and economic boycotts reshape international trade, import-export Romanian companies should prioritize robust currency risk management and market diversification. A strategic approach to hedging, combined with close monitoring of macroeconomic trends, will be essential for shielding businesses from currency fluctuations and fostering stability in their global partnerships", said Alin Latu, Country Manager iBanFirst Romania and Hungary.
Currency Projections for 2025
Slight Increase for EUR/USD Pair
In 2025, the EUR/USD exchange rate could reach a peak of 1.05, mainly driven by external factors. As inflation decreases in the U.S. and the Federal Reserve eases monetary policies, U.S. bond yields are expected to fall, prompting speculative funds to shift investments from dollars to euros. However, this increase may not be fully sustainable. The dollar is expected to remain strong in 2025 and beyond, bolstered by robust U.S. economic performance and the continued appeal of the U.S. stock market. While Donald Trump favors a weaker dollar, his tariffs could unintentionally drive up its value by reducing import volumes, which in turn lowers demand for foreign currency.
Stability for the EUR/RON Pair
The EUR/RON exchange rate is expected to remain relatively stable in the coming year. The National Bank of Romania (BNR) is likely to continue providing liquidity to the financial market. Although the official monetary policy rate stands at 6.50%, the effective real rate is around 5.50% due to an excess of liquidity in the interbank market. However, the recent decrease in inflation is largely due to external factors, such as lower food prices, rather than domestic policies. Should energy or agricultural commodity prices increase in 2025, inflationary pressures could return, limiting the central bank's ability to reduce interest rates as much as the market anticipates. For now, however, no price hikes are forecasted.
