The World Bank estimates a slowdown in Romania’s economy due to the war in Ukraine

The World Bank estimates a slowdown in Romania’s economy due to the war in Ukraine. We could have an increase of only 1.9% this year, given that the estimate was 4.3 in January.

The World Bank has changed its growth forecast for Romania to 1.9% this year from a January estimate of 4.3%, according to a report analyzing the effects of the war in Ukraine on Eastern European economies.

Instead, the institution increased GDP growth from 2023 to 4.1%, from an estimate of 3.8% in January.

Romania is expected to record 9.8% inflation this year and 5.3% next year, the report said. The report states that the strength of Romania’s economy will depend on the evolution of new variants of COVID-19 and the war in the region.

Romania’s ability to absorb EU funds will be essential for sustainable and green development. Pressures on inflation in the energy sector and food markets are challenging the recovery and require balanced action by the National Bank of Romania.

A substantial reduction in the fiscal deficit in 2022 is unlikely, as the government will have to support the economic recovery while maintaining macroeconomic stabilization. In the medium term, the deficit will follow a downward trend, but is likely to remain above 3 percent of GDP.

Rising food and energy prices as well as declining remittances could mean a longer recovery for vulnerable segments of the population. Prolonged war in Ukraine could lead to escalating short-term poverty, the World Bank report said.

At the regional level, the report estimates that Ukraine’s economy is likely to shrink by 45.1% this year, as the Russian invasion has shut down companies, reduced exports and made economic activity in large parts of the country impossible.

The World Bank also predicted that Russia’s GDP would fall by 11.2% in 2022 due to sanctions imposed by the United States and its Western allies on banks, state-owned enterprises and other Russian institutions.

The “War in the Region” report estimates that the Eastern European region, which includes Ukraine, Belarus and Moldova, is expected to shrink by 30.7% of GDP this year due to war shocks and trade disruption.

In 2022, growth in the Central European region, which includes Bulgaria, Croatia, Hungary, Poland and Romania, will be reduced to 3.5%, from 4.7% previously, due to the influx of refugees, rising commodity prices and the deterioration of confidence affecting demand.