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2021/12/07 / Erste Group Research

All eyes on 2022 state budget bill

The 2022 economic backdrop should be shaped to a great extent by the absorption of EU funds from the Recovery and Resilience Plan along with the regular Multiannual Financial Framework. Economic growth is expected to slow to 4.0%, from 6.4% expected in 2021, amidst faster growth in investments vs. household consumption. Inflation could decline gradually towards 4.2% y/y in December 2022, while remaining well above the NBR target band, backing further monetary tightening. We see the terminal rate for the hiking cycle at 3% by mid-2022, with risks for frontloading if central banks in CEE continue to deliver bolder hikes.

The C/A deficit is likely to remain elevated at 6.1% of GDP in 2022, as an accelerated investment process could inflate imports of intermediate goods. Inflows of EU money reduce the scope for Eurobond issuance in the context of almost unchanged gross funding needs at 11.1% of GDP. The leu could continue to weaken at the same 2-3% annual pace as in recent years in nominal terms, with the NBR holding a tight grip on the FX market. The EU roadmap for reforms under the Recovery and Resilience Facility as well as rating agency scrutiny should test the determination of the broad political coalition to streamline the state budget.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusRomania
Currency in focusRomanian Leu
Sector in focus-


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