It sees annual GDP declining 5.5% in 2020, followed by 4% growth in 2021. The country is expected to return to its 2019 real GDP level in 2022 at the earliest.
Romania’s GDP growth slowed from 7.1% in 2017 to 4.4% in 2018 and 4.1% in 2019.
While strong domestic demand in the first two months of 2020 manged to eke out moderate growth in the first quarter, production slowed almost to a halt in March and April. Euler Hermes said in its report it expects the gradual restart of the economy to last until at least the end of 2020.
Romania’s public finances are seen deteriorating further as the fiscal deficit deepened rapidly from just 0.8% in 2015 to 4.3% in 2019. Euler Hermes analysts see the country’s budget gap at 8.5% of GDP this year following fiscal stimulus to help the economy deal with the Covid-19 (estimated at around 2% of GDP), guarantees and subsidies for SMEs (estimated at around 3% of GDP) and a nominally lower gross domestic product.
Romania successfully raised EUR3.3 billion selling five and ten-year eurobonds on international markets. The government is also negotiating a loan of approximately EUR1 billion from the World Bank. If necessary, Romania could also require a loan from the International Monetary Fund this year or the next, Euler Hermes analysts said. Meanwhile, the country’s public debt is expected to grow from 35 % of GDP in 2019 to around 50% by the end of 2021.