The European Bank for Reconstruction and Development (EBRD) has significantly improved its estimates on Romania’s economic evolution in 2021, forecasting a 7.2 percent GDP increase this year, compared to 6 percent in June, shows a report released on Thursday by the international financial institution.
“Overall, GDP is expected to grow by 7.2 percent in 2021. In 2022, the Recovery and Resilience Facility should start boosting investments, while gradually improving net exports, in line with a slowdown of private consumption compared to recent years, and expected fiscal consolidation could translate into GDP growth of 4.4 percent. The main downside risk to the forecast is the evolution of the pandemic, as the vaccination rate is the second lowest in the EU,” the EBRD emphasizes.
According to the financial institution, a significant recovery is under way in all the three countries of the south-eastern European region (Greece, Romania and Bulgaria), after a difficult 2020, with the economies growing particularly strongly in both Greece and Romania, and more moderately in Bulgaria.
However, the EBRD warns that high commodity prices could affect the recovery of economies in its regions. “High prices of natural
gas, oil and other commodities weigh on the trade balances of energy importers, putting pressure on governments to step in to mitigate the burden of higher energy expenses on low-income households. High energy prices, supply chain disruptions and in some cases currency depreciations have also pushed inflation up. This is a cause for concern,” said EBRD chief economist Beata Javorcik.
EBRD’s latest Regional Economic Prospects report also notes that high energy prices may also test the public’s resolve for greening, and that while such support has been strong and rising in recent years globally, in some economies, including Egypt, Lithuania, Kazakhstan, Poland and Romania, it is lower than it was in the late 1990s.
According to the report, growth forecast in the EBRD regions is an average 5.5 percent in 2021, which represents an upward revision of 1.3 percentage points over EBRD’s June forecast. In 2022, as economies recover, growth is expected to moderate to 3.8 percent in the EBRD regions, 0.1 percentage point lower than expected in June 2021. However, the EBRD points out that these forecasts are subject to high uncertainty, reflecting risks associated with the future path of Covid-19, possible worsening of external conditions and weaker growth in trading partners.
The European Bank for Reconstruction and Development was established in 1991 to invest in the former communist bloc states and help them transition to a market economy. In recent years, the EBRD has begun to shift focus from the former Soviet bloc to North Africa and the Middle East.
EBRD’s overall investment in Romania stands at almost 9 billion, with 76 percent in the private sector. Its focus is on financing infrastructure, especially in less-developed regions, boosting private sector productivity and further developing the financial sector and capital markets.