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Erste cuts forecast for Romania’s growth this year on Covid-19 effects

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Romania’s economic growth will be significantly hurt by the spread of the coronavirus in Europe and the slowdown of the major EU economies, according to a forecast of the Austrian banking group Erste.

The group’s analysts have reduced the GDP growth estimate for 2020 from 3.5% to 3%, expecting Romania to be hit harder than the Czech Republic, Hungary, and Poland.

“As a result of the rapid spread of Covid-19 in Europe, we revised downwards by about 0.3 percentage points (pp), to 2.6%, the estimated growth rate for Central and Eastern Europe (CEE), the negative revisions ranging from 0.3pp for the Czech Republic, Hungary, and Poland to 0.5pp in the case of Romania and Croatia," Erste analysts warn.

The revision is provisional, assuming a transitory short-term impact of the virus in Europe. A longer-term crisis would hurt more severely the growth rates in the region.

However, the final economic cost "will depend to a large extent on how quickly the countries manage to limit the spread of the virus and reduce the fear factor. If the spread is not limited in the near future, we could see the further decrease of the economic activity on a global level, which could translate into even slower growth of the ECE,” according to Erste.

An increase of only 3% (under the short-term impact scenario) would be the lowest annual GDP advance for Romania since 2012 when the economy started to recover from the recession caused by the crisis of 2008-2010.

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