Alpha Bank: Romania Economic & Financial Outlook - Economic Research Division

Δευτέρα, 26 Σεπτεμβρίου 2022 10:00
Alpha Bank: Romania Economic & Financial Outlook - Economic Research Division

The Romanian economy rebounded strongly in 2021, as the Gross Domestic Product (GDP) increased by
5.9%, fully recovering to its pre-pandemic level. However, Russia’s invasion of Ukraine clouds the economic outlook for EU Member States. Romania’s trade and financial relations with Russia and Ukraine are limited. However, the war intensified the already existing inflationary pressures, due to higher energy and commodity prices, as well as supply chain disruptions. Risks to the outlook are tilted to the downside and are linked with the implications of the energy crisis. On the other side, the implementation of the national Recovery and Resilience Plan (RRP) is an upside risk, as it is expected to support investment. The fiscal position - which deteriorated drastically following the outbreak of Covid-19- remains a challenge, with a large negative primary balance expected in 2022. Overall, economic output is expected to increase in 2022, despite the high degree of uncertainty.
(cut-off date 31.07.2022)

Impressive V-shaped recovery in 2021, positive albeit weakened outlook for 2022

Following the recession in Romania in 2020 (-3.7%), real GDP increased by 5.9% in 2021 (Graph 1),
surpassing pre-pandemic levels. On the expenditure side, domestic demand was the main driver of GDP
growth, as the country’s main trading partners such as Italy, Germany and France and therefore the external sector of the economy, recovered only partially. Private consumption rose by 7.9% in 2021, making the largest contribution to overall GDP growth (4.8 pps), as the improved economic sentiment supported household spending. Gross fixed capital formation, which increased in 2020 (4.1%), remained on an upward trajectory, rising by 2.3% in 2021 and contributing 0.6 pps to real GDP growth. Inventories and public consumption (0.4%) added 1.8 pps and 0.1 pps to real GDP growth. Net exports contributed negatively to GDP growth by 1.4 pps, as imports of goods and services (14.6%) respectively, fueled by robust domestic demand, increased more than exports (12.5%). Net exports have had a negative contribution to real GDP growth since 2014. On the resources side, agriculture, industry, services, and net taxes on products contributed positively to growth at 0.5 pps, 1pps, 3.7pps and 0.8 pps, each, while construction contributed negatively by 0.1 pps. Robust real GDP growth ensured Romania continued to make progress in its in convergence with the EU-27, in terms of GDP per capita (in PPS). Standing at 52% of the EU-27 average in 2010, GDP per capita in Romania increased to 73% in 2021 and has followed an upward trajectory over the last decade.

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