The EBRD improves estimates for Romania

Romania's economy evolved in the first half of the year much better than expected. This is confirmed by the latest EBRD report, which shows that after a 5.9% rebound in 2021, boosted by private consumption, the GDP registered a surprising growth of 5.8% in the first months of 2022. The international financial institution says that all private consumption, especially of services, was the trigger of growth this time as well, being stimulated by the removal of restrictions related to the pandemic. The GDP growth for the whole of 2022 is estimated somewhere at 5.4% and follows the trend recently indicated also by the assessment mission carried out by the IMF in Romania. The IMF estimated a growth rate of the Romanian economy of 4.8%, higher by more than 2%.

Things will look completely different next year, though, the European Bank for Reconstruction and Development officials believe. For 2023, the bank estimates an economic growth rate of only 1.9%, which was itself revised upwards from the May estimate. The spring estimates showed that Romania's Gross Domestic Product was to report an increase of 2.9% in 2022 and a contraction of 1.1% in 2023. The EBRD puts the blame for the modest growth forecast for next year mainly on the deterioration of household incomes and on financing and energy costs, which constrain investments. Adding to this is the weak external demand, particularly from Germany, the EBRD report shows.

At the same time, financial experts even warn that there are still risks of a decline in Romania's economy, in the event of a more serious recession than expected in the euro zone. The EBRD shows that in all three EU member states in Southeastern Europe - Romania, Bulgaria and Greece - which recorded solid economic growth in the first half of 2022, signs of a significant slowdown are beginning to emerge. Inflation has reached two-digit figures, and uncertainty about energy supplies in the coming months is affecting confidence and investment.

The international financial institution estimates that economies in its region of activity will register growth of 2.3% in 2022, above its May forecasts, thanks to solid activity in the first half of the year, when households spent the savings accumulated during the pandemic quarantines, despite a decline in real wages. However, the reduction in Russian gas supplies led the EBRD to reduce its growth forecasts for next year to 3%, from 4.7% as previously estimated. Ukraine's GDP is estimated to contract by almost one third in 2022, while Russia's economy is expected to shrink by 5%, instead of the 10% as the EBRD had previously estimated. (LS)