“Currently we forecast GDP to drop in 2020 by 5% but rebound in 2021 by 3%. The recovery is contingent on a gradual normalization of economic activity in both Romania and its main economic partners, and a resumption of structural reforms. However, this would be hard to achieve should other major Covid-19 outbreaks emerge later in 2020 or early 2021,” it said in the Transition Report 2020-2021 – The State Strikes Back, released Tuesday.
The Romanian government expects an economic contraction of just 3.8% in 2020 and a 4.9% rebound in 2021. The government also sees the budget deficit at 8.6% of GDP this year, while EBRD estimates it at 9.2%.
Romania’s fiscal position has deteriorated further, requiring a budget revision, EBRD noted in the report.
“Romania entered the Covid-19 crisis with a significant fiscal deficit (4.3% of GDP in 2019). The combination of a declining economy and revenues, a fiscal stimulus program amounting to around 4% of GDP, and another increase in pensions (on top of that in 2019) in September 2020, is expected to raise the fiscal deficit in 2020 to an estimated 8.6% of GDP, as per the country’s August 2020 revised budget,” the report noted.