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EU Commission lowers Romania's 2021 economic growth f'cast to 7%

EU Commission lowers Romania's 2021 economic growth f'cast to 7% source: SeeNews

BUCHAREST (Romania), November 11 (SeeNews) - The European Commission said on Thursday that Romania’s economy is expected to expand by a real 7% in 2021, as compared to 7.4% growth rate projected in July.

The growth of Romania's gross domestic product (GDP) in 2022 is forecast at 5.1%, compared to 4.9% growth projected in summer, the Commission said in its Autumn 2021 Economic Forecast report. For 2023, the Commission expects Romania's economy to grow by 5.2%.

"After a strong rebound in the first half of 2021, Romania’s GDP is set to surpass its pre-pandemic levels before the end of the year. Going forward, growth is expected to remain robust at around 5%, with domestic consumption and the Recovery and Resilience Facility supported investments as the main drivers," the Commission said.

Risks to the growth forecast are mainly on the downside, as the low vaccination rate combined with further restrictions to mobility could dampen consumption over the next months, according to the report. Secondly, the formation of a new government could delay the implementation of the Recovery and Resilience Plan (RRP), lowering investments, the Commission said.

The Commission also noted that policy measures helped contain the rise in the unemployment rate, which is at 5% by the end of 2021 on the back of strong economic growth and increased demand for staff in healthcare, information technology and communications, and courier services. In 2022 and 2023, the unemployment rate is expected to decline as the economy recovers.

The average annual harmonized index of consumer prices (HICP) is projected to to reach 4% by the end of 2021, mainly as a result of higher electricity and fuel prices and is expected to stay at the same level in 2022, the Commission forecast.

Romania’s general government deficit is forecast to decrease to around 8% of GDP in 2021, from 9.4% in 2020, according to the EC. Further on, the deficit is forecast to fall to around 6.9% of GDP in 2022 before reaching 6.3% in 2023, mainly due to automatic stabilisers as the economy is growing rapidly, the expiry of some of the emergency health and labour market measures, and the projected lower purchases of health goods and services.

The general government debt is expected to rise to 49.3% of GDP in 2021, 51.8% in 2022 and 53.2% in 2023, mainly due to high primary deficits, the report showed.

"Risks to the fiscal forecast are broadly balanced. While in the short-term the risk of a delayed 2022 budget, and the risk of more waves of infection and further restraining measures loom, in the medium-term, the tax administration reform in the RRP could have a larger-than-expected positive impact on tax collection," the Commission concluded.

The report also showed that the EU economy is rebounding from the pandemic recession faster than expected, as vaccination campaigns progressed and restrictions started to be lifted. "Despite mounting headwinds, the EU economy is projected to keep expanding over the forecast horizon, achieving a growth rate of 5%, 4.3% and 2.5% in 2021, 2022 and 2023 respectively," the Commission said.

(1 euro=4.9489 lei)