WIIW expects moderate growth and fiscal consolidation performances from Romania

Vienna Institute for International Economic Studies, under the revised forecast for the countries in the region published on July 7, projects only 5.2% GDP growth for Romania this year, followed by 4.5% growth in 2022.

This is a significant 2.2pp and 0.4 pp below the forecast issued the same day by the European Commission.

WIIW also does not expect Romania’s Government to meet its 7.16%-of-GDP budget deficit (seen by prime minister Florin Citu as a low target already), but it trusts Romania can bring the budget deficit to just 4% of GDP by 2023 - one year before the 3%-of-GDP medium-term target ought to be observed.

While the WIIW’s outlook focuses mainly on the positive elements that resulted in broad upward GDP revisions for 20 of 23 countries covered, the major limitation to even stronger post-COVID recovery seems to be the coming wave of health issues (the fourth COVID wave).

The primary risk to economic recovery in CESEE is a new wave of COVID-19, WIIW says in the statement. Herd immunity will not be reached in most CESEE countries, as the vaccination rates are inadequate, it explains.

However, WIIW does not expect a new wave to wreak the same economic damage as previous waves did. Societies and economies across the region have learned to cope with the pandemic. Thus, a new COVID-19 wave will lead only to a slowdown in growth rather than a recession.

WIIW forecast covers inflation and current account balance as well.

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