For several years, Romania has been running a structural current account deficit. This year, the deficit is expected to worsen and could come close to 10% of GDP after -7.3% in 2021. The deficit had already reached EUR 20.2 billion over the first nine months of the year, well above the figure seen for 2021 as a whole. Romania's deficit is the largest amongst Central European countries [...]
Romania’s economy slowed sharply in H2 2021, with rising inflation causing wages to decline in real terms for the first time since 2010. Growth also remained imbalanced and both public- and private-sector debt increased between 2019 and 2021. Monetary tightening started too late in 2021 and has remained very limited since the start of 2022. The external shock caused by the conflict in Ukraine will only make the slowdown worse [...]
The Romanian economy is in the midst of a spectacular rebound. Real GDP has already returned to pre-Covid levels, and growth should reach 8.2% in 2021. But this performance has been accompanied by high fiscal and external deficits. Consequently, contrary to the other Central European countries, public debt is unlikely to narrow by 2022. Private-sector borrowers benefited from a moratorium on debt payments, but debt formerly under moratorium now presents a non-performing loan ratio of 10.9% [...]
Romania’s economy has become gradually unbalanced in recent years, ending 2019 with significant twin deficits, i.e. both a fiscal deficit and a current account deficit. An accommodative fiscal policy has stimulated growth and should continue to do so. Even so, Romania will not avoid a contagion effect due to the COVID-19 pandemic’s economic fallout. The country is bound to slip into recession even though growth has already dwindled [...]
Counter powers and institutional watchdogs have proved to be quite effective in stemming the government’s business-unfriendly measures and attempts to undermine the Rule of Law. This may pave the way for a more pragmatic and predictable policy stance. Meanwhile, owing to weaker external conditions, a soft landing of the economy is expected in the coming quarters whereas domestic demand should remain dynamic [...]
Romania is an upper-middle income country of 19.5 million people. The country joined the European Union in 2007, just before experiencing a deep recession in 2009-10 with significant consequences in terms of non-performing loans. The currency in Rumania is the leu (RON). During the last decade, Romania has experienced significant growth, as well as debt consolidation. As a result, the country entered into the COVID-19 crisis with relatively limited public and private debt levels. Romania has weathered the economic shock quite successfully. The recession was unavoidable, but the country was among the firsts in the region to recover pre-Covid GDP level.
The lack of political stability is still among Romania’s key risks, since it increases the likelihood of fiscal slippage. The business climate suffers from a weak judiciary and corruption, inhibiting the growth potential through a lack of productivity gains. Among weaknesses, twin (fiscal and external accounts) deficits are structural.
