The International Monetary Fund (IMF) has significantly downgraded the forecast on the Romanian economy this year, amid the novel Coronavirus pandemic, shows the latest “World Economic Outlook” released on Tuesday.
IMF says the Romanian economy should expect a 5% shrinkage this year, with a recovery in 2021, when it is estimated at 3.9%.
“The COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary protection measures are severely impacting economic activity. As a result of the pandemic, the global economy is projected to contract sharply by –3 percent in 2020, much worse than during the 2008–09 financial crisis. In a baseline scenario–which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound—the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support. The risks for even more severe outcomes, however, are substantial. Effective policies are essential to forestall the possibility of worse outcomes, and the necessary measures to reduce contagion and protect lives are an important investment in long-term human and economic health. Because the economic fallout is acute in specific sectors, policymakers will need to implement substantial targeted fiscal, monetary, and financial market measures to support affected households and businesses domestically. And internationally, strong multilateral cooperation is essential to overcome the effects of the pandemic, including to help financially constrained countries facing twin health and funding shocks, and for channeling aid to countries with weak health care systems,” says the report.
Projections for Romania’s GDP in 2020 stands at -5.0, and at 3.9 next year. Consumer prices projections- 2.2 in 2020 and 1.5 in 2021, while the current account balance projection stands at -5.5 in 2020 and at -4.7 in 2021.
IMF is giving an even more concerning outlook on the unemployment rate this year in Romania, 10.1% , when it stood at only 3.9% last year. The unemployment will decline to 6% in 2021.
As for all emerging markets and developing countries, including Romania, the Fund expects all those states to face a “health crisis, severe external demand shock, dramatic tightening in global financial conditions, and a plunge in commodity prices, which will have a severe impact on economic activity in commodity exporters. Overall, the group of emerging market and developing economies is projected to contract by –1.0 percent in 2020.”