ING expects 6.6% contraction for Romania’s economy this year

ING Bank Romania has revised downward sharply its projection for Romania’s GDP growth this year, less than two weeks after the previous forecast, from minus 0.9% to minus 6.6%.

Romania’s economy is unlikely to outperform those of France or Germany (seen as shrinking by 4% under the most optimistic scenario), the bank’s analysts argued.

ING Bank’s economists - in line with the broad consensus - expect the economy to recover toward the end of the year.

The economic activity, which has dropped sharply in March due to the new coronavirus pandemic and is likely to stay at a low level in April as well, will resume toward the end of May and the growth drivers will become active toward the end of June.

As regards the public deficit, the revised scenario includes a gap of between 7% and 9% of GDP, significantly wider than the 5% of GDP under the previous scenario.

Romania’s Government endorsed last December a budget planning aiming at 3.6% of GDP deficit based on the scenario of 4.1% GDP growth.

In regard to the monetary policy, ING Bank expects Romania’s National Bank (BNR) to return its focus on the exchange rate, although the banks’ analysts do not rule out further refinancing rate cuts - by 0.5 pp to 1.5% ”to the extent that the pressures on the exchange rate allow this.”

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