Macroeconomic confidence index up in Romania, yet outlook deteriorates

The macroeconomic confidence index compiled by the CFA Romania association edged up by 1pp month-on-month to 34.3% in September, News.ro reported.

The index takes values between 0% to 100%, where 50% indicates a moderate combination of current situation and expectations. The index plunged to 20.8% in March and partly recovered in the meantime, but remains significantly below the 50% “balance” benchmark.

In September, the sub-index reflecting the current situation rose sharply by 11pp to 33%. However, the sub-index that reflects analysts’ expectations dropped by 3.7pp in September compared to August.

This can be attributed to the visible deterioration of the sanitary outlook at home and abroad. As regards the duration of the economic impact of the coronavirus crisis, most respondents (52% ) anticipate that it will be felt strongly until the third quarter of 2021.

This also confirms expectations for a prolonged economic crisis. Under the previous monthly survey, 70% of the analysts expected the impact of the sanitary crisis to be felt until the second quarter of next year.

The CFA Romania analysts expect the local currency to weaken nominally roughly in line with the expected inflation, seen at 2.86% over the coming 12 months.

Consequently, they expect an average exchange rate of RON 4.9996 to EUR, with more pessimistic analysts seeing the currency slipping to RON 5.25 per EUR and others expecting the exchange rate to remain steady at RON 4.87 to EUR.

The forecast for this year’s GDP decline and budget deficit were sweetened to 4.5% (from 4.7%) and 7.9% of GDP (from 8,3% of GDP), respectively, compared to a month ago.

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