European Commission releases 2020 Winter Forecast for Romania

Economic growth will continue to ease in 2020 and 2021, the European Commission estimates

Ştefan Stoica, 14.02.2020, 13:50

Romania reported an economic growth
of 3.9% in 2019, compared to 4.4% in 2018, the European Commission winter
economic forecast shows. Published on Thursday, the report reveals that
Romania’s economic growth will continue to ease in 2020 and 2021. Compared to
the previous forecast published in November, the European Commission has
revised slightly upwards its economic forecast for Romania, considering that
last autumn the estimated economic growth for 2020 was 3.6% and 3.3% for 2021.
Right now, the Commission estimates a growth of 3.8% this year and 3.5% next
year. Of the 27 Member States, only Malta will report an economic growth above
Romania. The Commission recalls that real GDP growth declined from a
post-crisis peak of 7.1%

in 2017 to 4.4% in 2018 and is
expected to have moderated to 3.9% in 2019. Real GDP growth is forecast to
remain robust this year and the next, while the significant fiscal stimulus
planned in 2020 and 2021 is expected to give a new boost to private consumption
while also stimulating imports, the Commission also says. Investment is
expected to remain strong in 2020, supported by construction and greater use of
EU investment funds. The reversal in early 2020 of measures introduced in
December 2018 concerning the taxation of the banking and energy sectors is
expected to favor private investment, the Commission further notes. At the same
time, the European Commission estimates inflation to continue to shrink in
Romania, from an average of 3.9% in 2019 to 3.4% in 2020 and 3.3% in 2021. The
European Commission warns that the fiscal policy stance will be a key
determinant of the evolution of economic growth in 2020 and 2021. A
continuation of expansionary fiscal policies aggravating existing macroeconomic
imbalances could affect investors’ confidence and lead to higher funding costs.
Conversely, the start of much needed fiscal consolidation would contribute to the
unwinding of the accumulated imbalances but would also result in somewhat lower
economic growth over the forecast horizon, the winter forecast for Romania also
reads. More legislative unpredictability or rapidly deteriorating fiscal
deficit could also affect the business environment in Romania and have a
detrimental effect on investment decisions. As regards the Eurozone and the
European Union, the Commission announced Eurozone’s GDP growth is bound to
remain stable at 1.2%, both in 2020 and 2021. Over the same interval, the EU’s
growth is estimated to slow down slightly to 1.4%.

(Translated by V. Palcu)