Romanian lender BCR sees labour cost adjustments, fiscal consolidation as growth deterrents in 2021
The 3.9% GDP growth projection for Romania's GDP in 2021 is subject to downside risks generated by potential job losses due to the lagged labor cost adjustments, and planned fiscal consolidation. These factors might be offset by the inflows of EU funds in the second part of the year, according to the latest version of BCR's economic forecast.
For 2020, BCR maintains the forecast for a 4.7% GDP decline sketched in March - among the most optimistic at that time.
The robust recovery of retail sales in July confirms the expectations. The third quarter began impressively in terms of private consumption compared to the previous one, BCR head economist Ciprian Dascalu said, according to Profit.ro.
However, most economists believe fiscal consolidation measures are unavoidable next year after the public deficit will likely exceed 9% of GDP this year.
For 2022-2024, BCR revised its forecast for Romania's economy upward by 1.2-1.4pp for each year due to the European Union's economic recovery plan. The bank's analysts expect economic growth rates of 3.7%, 4.7%, and 5.3% respectively in 2022-2024.
On average, European funds will account for about 2.4% of GDP each year over the next decade. Romania will receive grants of up to EUR 63 billion in 2021-2027 from the multiannual budget and the economic recovery package.
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