The Czech Republic’s GDP is seen falling 0.7%, Poland’s GDP is expected to stagnate and Hungary’s GDP is seen growing 0.5% in 2020.
“Although, no later than last week, we were relatively optimistic, the avalanche of revisions on the economic growth and the signals we get from the real economy bring us to the point where we expect a GDP contraction in 2020. Except a temporary impulse for the retail sales segment, due to fear – even here, it will be interesting to see the extent to which the explosion in food sales will offset the decline in non-food sales), we simply cannot expect anything good in the coming months”, said ING Romania economist Valentin Tataru.
“Therefore, we expect a first quarter of stagnation, compared to the fourth quarter of 2019, a horrific second quarter of 2020 and a gradual comeback subsequently, which will trigger a GDP growth of (minus) -0.9%”, Tataru also said.
In terms of inflation, the increase in consumption prices is expected to decrease, against the backdrop of a collapse in fuel prices and a reduced demand to an annual rate of 2.5% end-2020. The previous inflation rate for end-2020 was 2.8%.
Also, ING Bank has maintained its exchange rate projection, expecting the Romanian leu to stand at 4.85 to the euro at the end of 2020. However, analysts say there is the possibility of breaking this level during the second quarter of 2020, with the central bank letting the national currency reach an all-time low of 4.86 units per euro, an evolution followed by a quasi-stagnation and a return to 4.85 units against the euro end-2020.
On Monday (March 16), Tataru said he expects a budget deficit of over 5% of GDP in 2020, even if the planned 40% increase in pensions, starting September 1, 2020, would be postponed.
The economic contraction estimated by ING Bank economists comes after a 4.1% economic growth in 2019. Before the sudden coronavirus crisis, Romania was expecting an economic growth of 4.1% and a budget deficit of 3.6 of GDP (vs 4.6% of GDP in 2019) in 2020.
Analysts say a decrease by one percentage point of the economic growth entails an increase in the budget deficit of 0.4% of GDP.