EC expects only moderate fiscal consolidation in Romania

Romania's general government budget's deficit will shrink by 1.4pp from 9.4% of GDP last year to 8% of GDP this year (on one-off elements), but the fiscal consolidation will measure only 1.7pp over the coming two years - leaving the public deficit at 6.3% of GDP in 2023 - according to the European Commission's Autumn Forecast published on November 11.

Under the Convergence program and Excessive Deficit procedure, the country's public deficit should come under 3% of GDP by 2024.

Under its Autumn Forecast, the Commission slightly touches its forecast for Romania's growth outlook - primarily shaped by the Recovery and Resilience Program. This year's growth rate was revised slightly downwards to 7% (from 7.4% under the Summer Forecast), while next year's growth was revised upwards to 5.1% from 4.9%.

"Whereas the effect of pent-up demand on private consumption is expected to fade out [in 2022-2023], growth is set to remain positive thanks to growing employment, falling inflation and robust wage growth," the Commission says.

The forecast also incorporates expenditures financed by RRF grants, which are set to gradually increase from 0.1% of GDP in 2021 to 1.1% of GDP in 2023. However, risks to the forecast remain due to a wave of new COVID-19 infections, the Commission concludes on a cautious note.

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