The Banker: “Romania gears up for another challenging year”
For Eastern European economies such as Romania, the turbulent times continue. The pandemic has hit economic growth, and now the war near Ukraine, coupled with high energy prices and rising inflation, could lead to new challenges, The Banker magazine wrote on Wednesday.
In a note in March, Oxford Economics wrote that Central and Eastern European countries are among the most exposed to the economic impact of Russia’s invasion of Ukraine, with the region’s gross domestic product (GDP) expected to fall by an average of 1. percentage point in 2022 and 0.5 in 2023. At the beginning of April, the Romanian authorities started talks with the European Commission on a comprehensive support package, estimated at EUR 3.5 billion, with the largest share going to social measures targeting low-income families.
Romania’s economy increased by 5.9% in 2021, according to revised provisional data from the National Institute of Statistics, after contracting by 3.7% in 2020. In the fourth quarter of 2021, the economy grew by 2.4%, with production industrial growth of 5% in 2021, with an increase in imports of 13.7% and 11.1% of exports.
In contrast, the agricultural sector recorded an annual decrease of 13.5%. At the end of March, the European Bank for Reconstruction and Development (EBRD) lowered its forecast for Romania’s economic growth from 4.4% to 2.8% for 2022, a significant decrease in part due to cross-border fighting at his northern border.
The magazine also notes that in 2023, Romania’s GDP is expected to grow by 4.2%, while other forecasts are less rosy. The World Bank estimates that Romania’s economy will grow by only 1.9% in 2022. Then, Fitch Ratings writes in a note updated in April that Romania’s GDP growth will slow to 2.1% in 2022, according to the credit rating of BBB- with a negative outlook.
The Banker quotes Valentin Tataru, chief economist at ING Bank Romania, who says that the negative impact of the Ukraine-Russia conflict on Romania’s trade balance is marginal, due to Romania’s weak direct trade ties with Russia and Ukraine, amounting to about 3% of the total volume. of the country’s trade, compared to 70% of trade with the EU.
However, Tătaru suggests on the other hand that the largest share of the war impact on Romania’s economy will be related to confidence. “This is as consumers and companies alike feel the need to postpone or re-prioritize current spending and investment, ”he says. “Another important indirect effect will be the increase in global energy and commodity prices. Although Romania is the least dependent country in the EU on Russian gas, it has no control over the movements of these prices on the world market. “