BCR and ING Bank improve forecast for Romania’s 2021 GDP

BCR and ING Bank, two of the biggest financial groups in Romania, significantly improved their forecasts for the country's 2021 GDP growth in response to the above-expectations GDP growth announced by the National Statistics Institute (INS) in Q4 2020.

"We have revised up this year's economic growth forecast to +4.2% from +2.7% mainly due to the statistically significant effect that the advance at the end of 2020 has on the GDP in 2021," BCR says in its note.

Statistically, however, high base effects such as those created by surprisingly strong growth in 2020 should be negative and not positive on future growth rates.

"BCR maintained one of the most pessimistic projections in the market, though. The economic growth in the last quarter of 2020 compared to the previous one (+5.3%) was well above our estimate and the median of the Bloomberg survey of +0.5%," BCR chief economist Ciprian Dascalu wrote in a note to investors.

He argued that the outstanding growth in Q4 came after weaker-than-expected recovery in Q3 and this might explain the "surprisingly good performance in the last quarter of last year.  

ING Bank also increased its 3.7% estimate for Romania's 2021 growth to 5.5% while maintaining the forecast for 2022 at 5.0%.

"Due to the significant carryover effect created by this fourth-quarter growth, the outlook for 2021 GDP is definitely shaping up to be much better than before. Looking beyond statistical effects, we believe that there are good prospects to see the economy back to pre-crisis levels as early as the third quarter of 2021," says ING Bank chief economist Valentin Tataru.

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