The World Bank (WB) projects Romania’s economy to grow by 1.9% in 2022, with risks strongly tilted to the downside.

The strength of the recovery will depend on the evolution of new Covid-19 variants and the severity of the hostilities in the region, the WB warns.

A protracted war in Ukraine may, however, push growth into negative territory and lead to an increase in poverty in the short run - according to the worst-case scenario defined by the WB’s economists.

Romania’s capacity to absorb the EU funds will be critical - as full absorption would add 1pp to the annual growth rates from 2022 to 2026, according to the Government’s estimates.

Despite certain improvements, the twin budget and current account deficits will not be tamed over the forecast period envisaged by the WB.

A substantial reduction of the fiscal deficit in 2022 is improbable, as the Government will have to support the economic recovery process while also supporting macroeconomic stabilization.

Over the medium term, the deficit will follow a downward trajectory but is likely to remain above 3% of GDP.

The current account gap is seen as widening to 7.2% of GDP this year and will fall below 6% in 2024. 

(Photo: Diony Teixeira/ Dreamstime)

andrei@romania-insider.com