State forecasting body revises Romania’s 2019 GDP growth estimate downwards to 4%

Romania’s state forecasting body CNSP, whose management was recently changed by the new Liberal Government, has revised downwards the medium-term macroeconomic outlook inherited from the former management appointed by the Social Democrat (PSD) Government. The new forecast shows lower growth rates: 4.0% in 2020 and 4.1% in 2021.

However, CNSP’s outlook is not as pessimistic as the projections drafted by the European Commission or independent analysts: it retains a rather robust optimism, in this respect.

Separately, the revised forecast envisaged gradual narrowing of the current account (CA) deficit to 3.5% of GDP in 2023. The local currency is assumed to remain steady versus the euro at RON 4.75 for EUR 1 by 2023 and the annual inflation rate is expected to ease to 2.4% at the end of the same year - both of the assumption subject to further revision, pending on the realisation of the growth and CA rather optimistic scenarios and also pending on a variable exogenous to the CNSP model: the budget balance.

For this year, CNSP’s revised forecast envisages negative growth rates for the value added generated by industry (-1.3% yoy from +5.4% yoy under the Spring Forecast) and agriculture (-1.5% yoy from +1.9% yoy). The output in the sector of services was revised to a 4.8% yoy growth rate from 5.8% yoy previously.

On the upside, the sector of constructions was revised upwards to a 15.5% growth rate this year (+7.2% under the Spring Forecast) and is expected to remain the fastest growing sector of the real economy over the next years with annual growth rates of 6.2% in 2020 and around 7% in the coming years. Industry is expected to recover to 2.9% growth in 2020 and maintain an annual growth rate of around 3%. After gaining momentum to 4.2% yoy in 2020 from 4.8% yoy this year, the sector of services will strengthen again to 4.5% y/y remaining one of the main drivers of growth.

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