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World Bank raises Romania's 2021 economic growth forecast to 7.3%

World Bank raises Romania's 2021 economic growth forecast to 7.3% Bucharest aerial view Source: pixabay.com

BUCHAREST (Romania), October 6 (SeeNews) - Romania's gross domestic product (GDP) is expected to grow by 7.3% this year, the World Bank said, improving its June forecast by 1.3 percentage points.

For 2022, the World Bank expects the Romanian economy to expand by 4.8%, higher than the previously projected 4.5% rise in gross domestic product (GDP) for next year, the lender said in its Europe and Central Asia Economic Update Fall 2021 report published on Tuesday.

Romania's 2021 economic advance, amongst the highest in the EU, is mainly due to the recovery in domestic demand, the bank noted, adding that the strength of the recovery will depend on tackling the low vaccination rate, which reflects high vaccine hesitancy, the evolution of the Delta variant, and the policy response to the health crisis.

Also, Romania’s capacity to absorb the EU funds will be critical to a sustainable recovery process. According to the report, in a scenario of 100% absorption of the Resilience and Recovery funds, Romania’s real GDP growth will, on average, rise by one percentage point per year between 2021 and 2026.

The World Bank expects Romania's fiscal deficit to remain high in 2021, at around 7.4% of GDP, but adds risks are tilted to the upside as the recent budget revision increased the planned expenditures by 1.6% of projected GDP while being overly optimistic as to revenue increases.

The bank advises that renewed attention should be given to fiscal consolidation to avoid an unsustainable increase in public debt over the medium term.

Although an economic rebound is expected to gradually reduce poverty by one percentage point to 10% by 2023, the triple hit in income in 2020 – the persistent pandemic, a prolonged drought, and declining remittance incomes – could mean a longer recovery process for vulnerable population segments compared to others in the coming years, the World Bank said.

The bank's estimate for economic growth in 2021 is slightly more optimistic than the government's, which forecasts a 7% rise in economic output.

Romania's economy contracted by 3.9% in 2020, compared to 4.1% growth in the previous year.

(1 euro=4.9483 lei)

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