State body keeps 4.1% growth forecast for RO economy despite Covid-19 risks

The emergence and spread of the coronavirus (Covid-19) could have an adverse effect on global demand, which could also negatively impact Romania’s exports, shows the Winter Forecast of the National Commission for Strategy and Prognosis (CNSP), released on February 26, Agerpres reported.

However, CNSP maintained its 4.1% forecast for the growth of the Romanian economy this year. Moreover, it expects the growth rate to slightly accelerate in the coming years, then ease towards 4% in 2023.

Real growth rates of 4-6% in the real wages combined with 1.7-1.9% rise in employment are expected to be strong enough to support the domestic demand and consequently Romania’s GDP, but not as strong as to further push up the current account deficit, which is projected to narrow from 4.7% of GDP in 2019 to 4.5% this year and later 3.5% in 2023.

CNSP also estimates that Romania’s industry will recover in the second part of this year, so that the overall evolution of the gross added value generated by this sector will be positive (+2.9%, compared to -1.9% in 2019). In the coming years, the added value generated by industry is seen as rising by around 3% per annum.

The sector of construction will keep rising by robust rates (+6.2%) in 2020, albeit slowing down from a record 17.5% advance estimated for 2019.

The sector of services will generate 4.2% more value added than in 2019, temporarily losing momentum from the 4.8% advance in 2019 to marginally gain momentum in the coming years.

The sector of agriculture is expected to advance by 2.5% (-4.4% in 2019) but CNSP stresses that it remains exposed to adverse weather risks.

On the utilisation side, the domestic demand is expected to remain robust driven by 4.4% advance in household consumption (+4.5% in 2019) while the gross fix capital formation will slow down to still significant 6.8% growth rate from 17.7% in 2019 (in close connection to the slowdown in the constructions sector).

The CNSP’s projections are significantly more optimistic than those presented by international institutions or local banks, which expect Romania’s economy to continue losing momentum this year and in the years to come.

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