Erste Group expects Romania to halve budget deficit by 2022

Romania's public deficit will shrink from 8.6% of GDP this year to 5.5% of GDP in 2021 and 4.1% of GDP in 2022, under the latest forecast issued by Erste Group Research, quoted by Hotnews.ro.

After rising sharply from 35.2% at the end of last year to 43.8% at the end of 2020, the public debt to GDP ratio will slow down thanks to a combination of shrinking public deficits and robust rise of GDP Austrian group expects.

Thus, the public indebtedness will rise to 48% of GDP at the end of 2022 - just under the 50% threshold that triggers, under the national fiscal responsibility law, specific steps aimed at preventing further deterioration of the public finance.

Erste Group also forecasts significant real GDP growth of 3.9% and 3.7% in 2021 and 2022, after a rather optimistic 4.7% contraction expected for 2020.

It also predicts the local currency will not weaken in real terms. Specifically, the exchange rate should not go over RON 5 for EUR 1 before the latest months of 2022.

"Our forecast shows an average weakening of the leu of 2-3ppt vs. the euro per year in nominal terms," the report reads. Meanwhile, the headline inflation rate is expected to accelerate to 3.4% in 2021 from 2.8% this year, then ease at 2.7% in 2022.

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