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BNR: Economic activity will continue growth in Q2, Q3, earlier than anticipated



The members of the Council of Administration of the Romanian National Bank (BNR) estimate that economic activity will continue to grow in the second and third quarter at greater pace than estimated in May, but in gradual deceleration in relation to the first quarter, according to the minutes of the monetary policy session of July 7, 2021.

According to the source, the members of the Administration Council of the BNR signalled that, given the recent developments of relevant indicators, both major components of internal demand - private demand and the gross fixed capital formation - probably contribute decisively to the abrupt increase of the annual variation of the GDP in the second quarter, but that a modest contribution is possible on the part of net exports, given that the consistent increase of exports in April overtook that of imports in goods and services. On this backdrop, the trade deficit easily steadied its growth over the same month of last year, while the annual dynamic of the current account deficit compressed powerfully, including on income balance contributions, remaining in the upper middle values in 2019 and 2020.

The document also mentions that the evolution of the pandemic and of the restrictive measures associated with it continues to generate, however, at least in the current perspective, great uncertainties and risks towards medium-term macroeconomic predictions, given the powerful slowing of the rhythm of vaccination on the internal level and the rising trend of the infection rate in some European countries, against the background of the rapid spread of the more contagious, Delta variant of the novel coronavirus.

The BNR document also signals that great uncertainties continue to be associated with the absorption rate of European funds allotted to Romania through the Recovery and Resilience Facility, as well as those that regard the new 2021-2027 multiannual financial framework, several Council members evoking the delay of the finalization and, implicitly, of the approval by the EC of the National Plan for Recovery and Resilience, as well as the institutional capacity and history of Romania's accomplishments in the field.

The document emphasizes that economic activity continued to recover in Q1 2021 at a considerably more alert pace than anticipated, although slower than the previous interval, reducing its decline in yearly terms to just -0.2 percent from 1.4 percent in Q4 2020, with a quarterly advance of 2.8 percent.