In its spring economic forecast, the European Commission expected Romania’s GDP to drop 6% this year under the impact of the coronavirus crisis, but saw 2021 growth at 4.2%.
Inflation is forecast to reach 2.5% this year and to pick up to an average of 2.8% in 2021 supported by a recovery in demand.
The EU economy will experience a deep recession this year due to the coronavirus pandemic, despite the swift and comprehensive policy response at both EU and national levels. Because the lifting of lockdown measures is proceeding at a more gradual pace than assumed in the spring forecast, the impact on economic activity in 2020 will be more significant than anticipated.
The summer 2020 economic forecast projects that the euro area economy will contract by 8.7% in 2020 and grow by 6.1% in 2021. The EU economy is forecast to contract by 8.3% in 2020 and grow by 5.8% in 2021. The contraction in 2020 is, therefore, projected to be significantly greater than the 7.7% projected for the euro area and 7.4% for the EU as a whole in the spring forecast. Growth in 2021 will also be slightly less robust than projected in the spring.
The impact of the pandemic on economic activity was already considerable in the first quarter of 2020, even though most member states only began introducing lockdown measures in mid-March. With a far longer period of disruption and lockdown taking place in the second quarter of 2020, economic output is expected to have contracted significantly more than in the first quarter, the EC said.
However, early data for May and June suggest that the worst may have passed. The recovery is expected to gain traction in the second half of the year, albeit remaining incomplete and uneven across member states.
The risks to the forecast are exceptionally high and mainly to the downside, the Commission highlights.
The scale and duration of the pandemic, and of possibly necessary future lockdown measures, remain essentially unknown. The forecast assumes that lockdown measures will continue to ease and there will not be a second wave of infections.
It said there are considerable risks that the labor market could suffer more long-term scars than expected and that liquidity difficulties could turn into solvency problems for many companies.
There are risks to the stability of financial markets and a danger that member states may fail to sufficiently coordinate national policy responses. A failure to secure an agreement on the future trading relationship between the UK and the EU could also result in lower growth, particularly for the UK. More broadly, protectionist policies and an excessive turning away from global production chains could also negatively affect trade and the global economy.
The European Commission publishes two comprehensive forecasts (spring and autumn) and two interim forecasts (winter and summer) each year. The interim forecasts cover annual and quarterly GDP and inflation for the current and following year for all member states, as well as EU and euro area aggregates. The next economic forecast will be the autumn 2020 economic forecast scheduled to be published in November 2020.