July 14 (SeeNews) - The European Commission said on Thursday that Romania’s economy is expected to expand by a real 3.9% in 2022, as compared to 2.6% growth rate projected in May.
The improved forecast is due to a strong 5.2% quarterly gross domestic product (GDP) growth in the first quarter of 2022, the European Commission said in its Summer 2022 Economic Forecast report.
According to provisional data, this outturn is attributed to a solid increase in gross fixed capital formation and private consumption, while net exports contributed negatively, the Commission said, citing data from the national statistics office. Also, this robust growth was backed by higher wages keeping pace with inflation and the phase-out of Covid-19 restrictions, the EC noted.
However, for 2023, however, a downward revision to 2.9% is warranted, in line with the slower global and EU growth prospects, according to the report. Private consumption and investments are set to be the main growth drivers for this year and the next, while net exports are projected to act as a drag on GDP and lead to a widening of the trade deficit, the EC explained.
In May, the EC said it is expecting a 3.6% GDP growth in 2023.
Going forward, economic activity and sentiment indicators point towards a less optimistic second quarter, according to the Commission.
In the Commission's view, the high inflation is set to dent the purchasing power of households, while the upbeat outlook in the labour market and the support measures announced by the government in April, notably for vulnerable households, should keep private consumption growing albeit more moderately.
"The dampening effect of high interest rates and uncertainty on private investment is forecast to be more than offset by investments supported through the sizeable Resilience and Recovery Facility and other EU funds. The foreign trade outlook worsened due to the war and lockdowns in other parts of the world, implying a slowdown, which will affect more exports than imports, as seen so far," the Commission also said.
Romania’s economic output will increase by an estimated 2.9% in 2022, finance ministry analysts said in April, revising their previous forecast for 4.3% growth.
The country's economy grew by 5.9% in 2021, compared to a 3.9% contraction in 2020.
(1 euro=4.9418 lei)