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Erste: Romanian economy will contract by 4.7% this year
Erste Bank analysts foresee an economic contraction of 4.7% this year in Romania on the background of COVID 19 crisis, followed by an increase next year, when GDP might advance by 3.9%.
According to Erste, the health crisis could trigger a drop of Romania's GDP by two figures in quarter 2 of this year, followed by the relaunch by two figures in quarter 3, encouraged by significant fiscal and monetary stimuli at domestic and international level.
“This will deteriorate even more public finances so that budget deficit could worsen to 7.3% of GDP,” a report elaborated by Erste Bank analysts shows.
In exchange, they reviewed downwards estimates about inflation rate at the end of 2020 to 2.8% from 3.4%, mainly because of the sudden drop of oil prices and pf the significant shock addressed to demand.
Analysts point out that economic prognoses are very much influenced bu uncertainties varying from the duration and severity of COVID 19 pandemics to the consumers' behaviour after the crisis.
Starting from the hypothesis that most of the shock which began by mid March will disappear by the end of May, Erste Bank analysts consider that GDP in quarter 2 may contract by 15.2% compared to quarter 1. But, in quarter 3, analysts consider that GDP will record an advance of 12.8% against quarter 2, as a result of huge fiscal and monetary stimuli introduced at home and abroad, to be followed by an expansion of 0.7% in quarter 4.
“On the overall, GDP will contract by 4.7% throughout the year. Relaunch could continue in 2021, when GDP will record an advance of 3.9%, Erste analysts say.
The deterioration of growth prospects would increase budget deficit by 2.8%. To that extraordinary public expenses which will increase budget deficit by 1.5% will be added to that. Adding all these elements, fiscal deficit could reach 7.3% of GDP this year.
Erste Group is one of the main suppliers of financial services in eastern EU. 47,700 employees serve 16.2 million clients in 2,500 branches in 7 countries (Austria, Check Republic, Slovakia, Romania, Hungary, Croatia and Serbia). At the end of 2018, Erste Group owned shares of 236.8 billion euros, recorded a net profit of 1.79 billion euros and an index of rank 1 capital of 13.5%.
BCR is a member of Erste Group. BCR offers a complete range of financial products and services by means of a network of 21 business center and 22 mobile offices dedicated to companies and 431 retail units located in most towns in the country with over 10,000 inhabitants. The bank has a national network of over 2,000 ATMs and 15,300 payment terminals by card with sellers.