EC ups from 5.1% to 7.4% its forecast for Romania’s 2021 GDP growth

The European Commission has revised its forecast for Romania’s 2021 economic growth upward to 7.4%, under the Summer Forecast published on July 7. It is a significant 2.3pp adjustment from 5.1% predicted under the previous round of forecasting in May.

This is higher than projected in the spring thanks to the stronger-than-expected performance of the economy in the first quarter of this year, the Commission says in a statement.

The figure exceeds the expectations of the otherwise highly optimistic prime minister Florin Citu. However, more recently, analysts are speaking about “upside risk” for the country’s economic growth that might come close to the double-digit zone this year.

The Commission maintained its forecast for next year’s economic growth in Romania at 4.9%.

The upsides of the estimates are the strong business and consumer sentiment. Private consumption is expected to remain very robust, supported by the lifting of restrictions. The continued increase in order books suggests that industrial activity will expand in the coming months. Exports are set to improve in line with the ongoing recovery in Romania’s main trading partners.

The downsides stem from the negative and worsening external balance and the rising prices. The contribution of net exports to growth is expected to remain negative over the forecast horizon.

Annual HICP inflation increased from 1.8% in December 2020 to around 2.7% in April 2021 and is forecast to average 3.2% over the entire year, before somewhat declining to 2.9% in 2022, as the impact of energy price increases starts to fade, and the recovery in demand cools down.

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