EC sweetens forecast for Romania’s GDP

The European Commission (EC) revised its forecast for Romania's GDP growth from a 6% contraction projected in July to a milder 5.2% decline under the Autumn Forecast published on November 5.

The recovery will also be slower in 2021 - only 3.3% (compared to the 4% forecast in July).

Overall, this means the Commission has not changed its forecast for Romania's GDP in 2021, estimated at some 2% below the 2019 level. The 2% decline is roughly half of the 3.9% contraction projected for the euro area over the same two-year period (2021 versus 2019).

The EC expects Romania's GDP growth to accelerate to 3.8% in 2022.

While the Commission revised the forecast for Romania's GDP to accommodate the lockdown's softer than anticipated impact on the EU economy, it remains highly concerned about Romania's public finance. Based on no policy change assumptions (meaning the 40% pension hike stands), the EC projected this year's public deficit at 10.3% of GDP to further widen to 12.3% of GDP in 2022. The public debt would reach 63.6% of GDP under this scenario.

However, the Commission implies that the new Government might pursue more moderate fiscal and budgetary policies after the December 6 elections.

"An upside risk to the general government balance projections is that the increases in pensions and child allowances could turn out to be more moderate," the report reads.

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