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EBRD raises Romania’s 2021 economic growth forecast to 7.2%

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Romania‘s gross domestic product (GDP) will increase by 7.2% in 2021, the European Bank for Reconstruction and Development (EBRD) said on Thursday, improving its June forecast of a 6% growth, according to See News.

“After falling in 2020 by 3.9%, Romania’s GDP expanded by 7% in the first two quarters of 2021 and by mid-year already exceeded pre-pandemic levels in adjusted terms, but economic risks have lately increased,” the EBRD said in the latest edition of its Regional Economic Prospects report.

According to the bank, domestic demand remained the key driver of growth, with investment expanding at a strong pace of 12% year-on-year in this period.

Romania’s cash-based fiscal deficit will remain high in 2021 at about 7.1% of GDP, as the above expectations revenues performance was matched with a significant increase in expenditures in the latest budget revision.

“Inflationary pressures significantly increased since May 2021, with inflation reaching 6.3% in September as food prices accelerated on top of energy price hikes. Consequently, the central bank increased the policy rate in October to 1.5%,” said EBRD.

The bank eplaint that Romania’s gross domestic product (GDP) is expected to grow 4.4%, compared to a 5% growth forecast in June.

“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%,” added EBRD.

“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 concluded.