A leading bank says Romania’s economy will contract by 6.6% this year due to measures taken during the coronavirus pandemic.
ING bank Romania, the local subsidiary of the Dutch multinational bank, revised its forecast sharply downwards less than two weeks after the previous projection which was minus 0.9%, Ziarul Financiar reported.
“In these troubled times, economic forecasts are less of an economic science than they were before,” said bank analyst Valentin Tataru “We are facing a situation without precedent.”
Romania’s economy is unlikely to outperform those of France or Germany, which will shrink by at least 4%, the bank’s analysts said.
“The new prognosis is justified by the bad news coming from everywhere, a 4% contraction is already an optimistic scenario, while France is losing 3% of its GDP monthly,” Tataru was quoted as saying.
The health crisis has badly affected Romania’s economy with businesses forced to shut or suspend their activity as restaurants, hotels, shops have closed and sporting activities and concerts have been canceled under a 30-day state of emergency. Up to one million jobs may be affected by the crisis, industry groups say.
The latest forecast came after Romania’s second biggest lender, the Romanian Commercial Bank, or BCR, part of Austrian Erste Bank Group, said it expected the country’s economy to contract by 4.7% this year amid a severe eurozone recession caused by measures taken during the Covid-19 pandemic.
Prior to the health crisis, the bank’s analysts had forecast 3.5% growth for 2020.
Both banks expect the economy to recover toward the end of the year.
BCR forecast a double-digit rate drop in the second quarter, followed by a double-digit recovery in the third quarter, when growth will be sustained by fiscal and monetary stimulus.
Romania’s economy was badly hit by the virus outbreak in March and will likely remain low in April, with slight recovery in toward the end of May, while growth will resume toward the end of June, ING said.
Romania’s government said it predicted a 3.6% budget deficit, based on a growth scenario tof 4.1%.