After contracting by an estimated at 3.9% in 2020, the Romanian economy would grow by 4.3% this year, while in 2022 the economic growth is expected be around 4.1%, according to the latest report on the world economic outlook published on Wednesday by the World Bank, cited by Agerpres. By comparison, in January the World Bank forecasted a contraction of 5% of Romania’s GDP for 2020, with an increase by 3.5% in 2021 and 4.1% in 2022.
The Romanian economy performed better than expected, contracting by only 3.9% in 2020. A proactive but limited fiscal response of 4.4% of GDP helped companies retain their employees and fueled household income, the report shows.
Economic recovery is expected at 4.3% GDP growth in 2021, supported by increased economic activity in the second half of 2021. The strength of the recovery will depend on the success of the vaccination campaign, and the political response to the health crisis, as well as developments in the EU. Given the limited fiscal space, the impact of the stimulus measures adopted at the EU level will play a crucial role in the recovery, the World Bank estimates.
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The institution expects the National Bank of Romania (BNR) to continue its quantitative easing policies in further supporting the recovery. However, inflationary pressures and current account deficits would reappear on the background of the growth recovery, which will require an appropriate policy response.
In this context, the World Bank estimates that the inflation rate will be 3% in 2021, with a rise to 3.2% in 2022, and a fall to 2.9% in 2023. The current account deficit would fruther deepen with a 5.4% of GDP in 2021, a 5.7% of GDP in 2022, and a 6.3% of GDP in 2023.
Translated by: O.H.