Romania's state forecasting body slightly more optimistic about economic recovery

Romania's state strategy and forecasting commission (CNSP) revised its medium-term economic scenario, envisaging slightly faster economic recovery in 2021-2022.

The revision is pinpointed by expectations for stronger domestic demand (both on the consumption and investments side) and only marginally by an improved perception of the future external demand (exports).

Thus, CNSP increased the GDP growth forecast for this year from 4.3% under the winter forecast to 5% - a figure that remains within the conservative territory. The Fiscal Council's head Daniel Daianu pointed to a 5-6% growth rate, and the International Monetary Fund (the latest IFI to update its forecast on Romania) agreed that a 6% economic expansion is possible this year.

Speaking of the details in the CNSP forecast, private consumption is seen as rising by 5.1% this year and 4.9% in 2022 (compared to 3.7% and 4.5% respectively, under the Winter Forecast). Gross fix capital formation would expand by 7% this year to soar by another 8.8% in 2022 (6.5% and 8.8% under Winter Forecast).

On the formation side, the biggest revision was operated in the sector of services - which is now expected to generate 3.9% more value-added this year than in 2020, a realistic scenario considering the relaxation in HoReCa.

Overall, Romania's economy will expand by an annual average real rate of 4.9% in 2021-2024, under the revised CNSP scenario - compared to 4.75% per annum previously.

CNSP also sees higher inflation: 3.1% on average this year, followed by 2.9% in 2022, up from 2.4% and 2.6%, respectively. This is particularly important for fiscal consolidation, as larger nominal GDP will eventually result in smaller public deficit to GDP ratios.

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