Romania’s state forecasting body revises 2021 GDP growth forecast to 7%

Romania’s state forecasting body CNP revised the GDP growth projection for this year to 7%, from 5% envisaged in April and 4.3% in February. The nominal GDP is revised upward by 2.8% compared to April and 5.2% compared to February, to RON 1,179.4 bln (EUR 238.8 bln).

CNP’s forecast is rather cautious compared to the “double-digit” growth rate mentioned by prime minister Florin Citu recently as possible for this year.

CNP operates a small revision on the GDP deflator (from 3.2% to 4%) and a more substantial one for the consumer price index (from 3.1% to 4.2%).

The average exchange rate this year is seen at 4.92 RON to EUR, a forecast that was not revised compared to April.

Compared to the latest prediction (April), CNP revised the projection for the sectors of services (from 3.9% to 6.8%) and industry (from 5.8% to 7.7%) upward. The institution still counts on a robust 14.1% advance in the value added generated by agriculture and a 6.1% increase in the construction sector.

Separately, the net taxes would contribute more, thanks to a 7.1% annual increase (versus 5.1% estimated in April).

On the utilisation side, both the domestic demand (for consumption and investments) and the external demand are revised upward. Thus, consumption (accounting for the biggest share of the GDP utilisation) will increase by 6.6% versus 4.3% projected in April and lower than the overall GDP production.

Gross fix capital formation is expected to rise faster, by 8.8% YoY versus 7% envisaged in April - and still faster than the GDP production. Exports will increase by 9.8% YoY versus 8.3% YoY envisaged in April.

The more robust domestic demand for consumption (which remains the main driver for growth, despite the faster advance of the investments) may be explained to a small extent by the stronger rise in the real wages (+2.9% YoY compared to 2.0% envisaged in April) - but more by the stronger consequent consumer confidence.

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