UniCredit expects Romania’s economic growth to weaken below region’s average

UniCredit Bank Romania, in its November quarterly report, affirmed the estimate expressed in October by its chief economist Florin Andrei for Romania’s 4.2% economic growth this year, a robust performance compared to projections as pessimistic as 2.8% voiced in April by the same bank.

However, the “populist public spending” has exhausted the resources for increasing the spending in any other area, the bank’s economists warned in the quarterly report, implying that the fiscal stimulus has reached its limit, Ziarul Financiar reported.

Consequently, UniCredit Bank expects Romania’s economy to grow by only 2.6% next year, “slower than that of the other countries in Central and Eastern Europe,” but still more than the feeble 1.8% projected by UniCredit in April.

The current projection of UniCredit Bank remains the most pessimistic and it compares to a slightly better 3.2% projection issued by the European Bank for Reconstruction and Development (EBRD) this November.

According to UniCredit’s scenario, the budget deficit could exceed 4% of GDP in 2020 and 6% of GDP in 2021, and Romania could lose its investment grade rating if pensions increase by 40% in 2020 and the Government does not take corrective measures.

Romania currently holds the weakest sovereign rating in the investment grade area.

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