The World Bank said in the latest edition of Europe and Central Asia Economic report that it expects Romania‘s gross domestic product (GDP) to grow by 4.3% in 2021, according to Romania Insider.
“Romania’s economy is expected to improve this year in the second half of the year,” said the World Bank.
The World Bank explained that the strength of the recovery will depend on the success of the vaccine rollout and the policy response to the health crisis, as well as the developments in the EU and that the impact of the stimulus pursued at the EU level that will play a critical role in the recovery given limited fiscal space.
“Romania’s Central Bank will continue its quantitative easing policy, further supporting the recovery. As growth recovers, inflationary and current account deficit pressures are expected to re-emerge, requiring an appropriate policy response,” according to the report.
“A substantial reduction of the fiscal deficit in 2021 is improbable, as the government will have to support the economic recovery process. Over the medium term, the deficit will follow a downward trajectory but is likely to remain above 3% throughout the projection period,” stated the World Bank.
According to its estimations, the widening fiscal deficit would push public debt to 62.2% in 2023, from 37.3% in 2019.
Romania’s public debt remains one of the lowest in the EU. The projections for 2021 is that poverty is to remain elevated in Romania due to the triple-hit in incomes facing poorer segments of the population, in the form of the persistent pandemic, the poor agricultural year, and declining remittance incomes.
Inflation is expected to reach 3% in 2021 and then accelerate to 3.2% in 2022. The World Bank expects Romania’s GDP to expand by 4.1% in 2022.