Page 52 - Central & Southeast Outlook 2020

Independent analysts put the GDP growth for 2020 around 3%. This marks a steep slowdown​from the record 7.1% GDP growth in 2017.
The European Commission has revised upwards its forecast for Romania’s economic growth in 2019 from 3.3% in the Spring Forecast in May, to 4.1% according to the Autumn Forecast issued on November 7. The Commission has also improved the forecast for growth in 2020 from 3.1% to 3.6% while the growth rate for 2021 is expected to decline to 3.1%.
Meanwhile the government still expects — and drew up the 2020 budget based on — a 4.1% growth rate, rising to 4.2% in 2021.
In a note on Romania, Raiffeisen analysts note the below-expectations growth in 2019, and forecast: “Our expectations are for a further deceleration of the GDP advance in 2020 to 3%, a level close to potential growth. Domestic demand is expected to remain the main GDP driver. Still, we look for a more visible deceleration of the GDP advance in 2021, as the much-needed fiscal consolidation would likely be delayed after the 2020 elections.”
The latest GDP growth data released by the statistics office, INS, in December showed that Romania’s economic growth eased to 3.0% in 3Q19, from 4.6% in the first half of the year.
Agriculture and industry made a combined negative contribution of 1.2 percentage points to the GDP growth in the third quarter — compared to -0.1pp in Q2 when the overall GDP growth was 4.4% y/y. The two sectors were thus almost entirely responsible for the slowdown seen in Q3 compared to Q2. However, negative performances in other sectors point to a broader slowdown likely to continue during the coming quarters. On the upside, the gross fixed capital formation soared in Q3 at the expense of a slower advance of consumption.
Also in December, the INS reported that Romania’s industrial production index contracted by 4.5% y/y in October and accumulated an average decline of 1.9% in the first ten months of 2019 compared to the same period of 2018. This was the steepest decline since the 2009 recession.
Retail sales continued to grow strongly in the second half of 2019. However, the real 6.8% y/y increase in October marked a slight decline from the average 7.4% y/y growth rate posted in Q3 and 7.8% y/y in January-September.
The wide but arguably under control external deficit of close to 5% of GDP per annum is a constant threat to the stability of the exchange rate and prices, but the central bank does not encourage an exchange rate
52​ CESE Outlook 2020​ ​ ​www.intellinews.com