Romania’s second biggest bank expects economic growth to ease to 2% in 2021

Romania's economy could advance by 3.5% this year and growth could slow down to 2% next year, said Ciprian Dascalu, chief economist at BCR, the country’s second biggest lender, in a meeting with the media.

“We expect 3.5% economic growth. Next year we will see a slowdown, which is due in particular to the expected efforts aimed at reducing the budget deficit to 3% of GDP. This is our scenario,” Dascalu said, according to 9am.ro.

The BCR economist also expects inflation to stay in the range targeted by Romania’s National Bank, namely 2.5% +/-1pp, in the next two years.

The BCR forecast indicates a budget deficit of 3.8% of GDP for this year and 3% of GDP next year.

The average exchange rate estimated by the bank for this year is RON 4.87 to EUR, while the local currency will weaken to RON 4.97 to EUR next year. The forecast also indicates a reduction of the monetary policy interest to 2% towards the end of 2021.

Dascalu mentioned that the financial markets are expecting early elections this year, and, if they take place, the yields on government securities could slightly decrease. Otherwise, if the early elections do not take place, the yields could go up, increasing the state’s borrowing costs.

The state budget for 2020 is built on an economic growth rate of 4.1%, a budget deficit of 3.59%, and an average inflation rate of 3.1%.

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