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EBRD doubles forecast for Romania's 2021 GDP growth to 6%

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Romania's GDP will increase by 6% in 2021, and the country's economy will end the year 1.9% above the pre-crisis 2019 level - according to the latest Regional Economic Prospects report published on June 29 by the European Bank for Reconstruction and Development (EBRD).

 

The EBRD thus doubled the forecast for the country's economic growth this year, from 3.0% projected last September - just before a new COVID-19 wave hit Europe.

However, Romania was not severely touched by the health crisis over the winter and keeping its economy mostly open helped it report outstanding performances in the last quarter of 2020 and the first quarter this year. In the region, only Poland (+2.2% versus 2019), Lithuania (+2.1%), and Serbia (+4.9%) have weathered better the crisis.

 

Romania weathered the COVID-19 crisis better than initially expected, as GDP fell by 3.9% in 2020, the EBRD says. Overall, private consumption had the steepest decline in 2020, of 4.9%, while resilient investments and improved net exports had positive contributions to growth, it explains.

 

In the last two quarters (Q4-Q1), the economy has expanded at a robust pace, as containment measures had a limited impact on economic activity. In the first quarter of 2021, GDP reached pre-pandemic levels in adjusted terms, signalling a solid momentum for short-term recovery driven by domestic demand.

 

On the external front, goods exports already recovered by the end of 2020, but momentum weakened in the first quarter of 2021, most likely reflecting supply shortages in manufacturing, while service exports recovered to pre-pandemic levels in the first quarter.

 

On the fiscal side, the high structural deficit and support measures of about 4.5% of GDP led to a significant deterioration of the government balance to -9.2% of GDP in 2020 (under ESA methodology) and increased public debt to 47% of GDP.

Overall, EBRD expects the economy's current momentum to lead to 6% GDP growth in 2021.

 

 

In 2022, the Recovery and Resilience Facility should start boosting investments in particular, while private consumption and gradually improving net exports could translate into growth of up to 5% in 2022. The key downside risks to the forecast are related to the evolution of the pandemic.

 

 

 

 

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