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2021/06/11 / Erste Group Research

Ambitious reform plans ahead

We revised our economic growth forecast for 2021 to +6.7% from +4.2% after big positive surprises in 4Q20, with its subsequent carry over effect, and 1Q21. Real incomes are expected to barely grow this year, with the labour market yet to fully adjust to the permanent changes in the consumer behaviour. Pent-up household demand and state investments should be the main growth drivers this year. The breakdown for 1Q21 GDP growth reveals, except for net exports which remain a drag to growth, a solid underlying story. Addressing the net export negative growth contribution is likely to require consistent supply side reforms. In the meantime the local currency should remain under weakening pressure.

The government committed to a set of ambitious reforms, gradually phased-in after post-pandemic recovery, as part of the agreement with the EC to tap funds from the EU Recovery and Resilience Plan. Our growth forecast revision assumes as a baseline scenario a significant absorption rate and, even based on a conservative growth multiplier, GDP is likely to run above potential until 2026. Longer-term, it remains to be seen how this opportunity would be lead to an upgrade to potential growth in order to offset the demographic-driven decline in potential GDP over the decades to come.

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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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