European Commission. Romania’s economy to shrink 6% this year due to COVID-19 crisis, and rebound in 2021


Romania’s economy is projected to decline sharply by 6% this year due to effects of the COVID-19 crisis on the economy, according to the European Commission

The forecast drop comes after several years of robust growth. The economy is expected to make rebound in 2021 although not the same as pre-crisis levels, the forecast by the EC’s  Spring Forecast said.

“At the onset of the COVID-19 crisis, Romaniaʼs economy was growing at an annual rate of around 4%, mainly driven by private consumption,” the report said.

The report said that “signs of macro-economic imbalances had already emerged, notably in the form of high and growing current account and fiscal deficits.”

Measures taken under the state of emergency “are expected to significantly affect services and manufacturing.”

It said businesses would “react to the very uncertain environment by postponing or cancelling investment projects… and public investment activity, meanwhile, is projected to be subdued.”

However, the government “adopted measures aimed at supporting consumers and businesses, such as loan guarantees for SMEs, temporary moratoriums on loan servicing, and technical unemployment schemes,” to cushion the economic effects.

It said real is GDP is projected to contract by 6% in 2020 and rebound by 4.25% in 2021.

Unemployment, which was a record low of 3.9% in 2019, will increase to 6.5% in 2020 as some firms will inevitably close as a result of the COVID-19 crisis, the forecast said. It will ease at 5.4% in 2021.

Inflation is expected to ease to 2.5% in 2020 due to the drop in oil prices.

 In 2021, investment is expected to recover only partially amid persistent uncertainty. Exports are also set to contract in 2020, reflecting the economic contraction in Romania’s main trading partners and supply chain disruptions.

The European Commission also expects Romania’s budget deficit to increase to 9.2% of GDP this year (compared to the government’s target of 6.7% of the GDP) as the fiscal measures required to fight the COVID-19 crisis are compounded by previous fiscal slippages.


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