Research Detail
| 2022/03/09 / Erste Group Research |
Slower GDP growth, higher inflation Forecast uncertainty is extremely high and is likely to remain elevated for some time. While the magnitude of the forecast adjustments is still subject to different scenarios regarding the war in Ukraine and subsequent economic spillovers, the direction is clear: slower growth, with meaningful recession probability, and higher inflation. The central bank is therefore caught between a rock and a hard place. The situation is even less rosy for the fiscal authority: supporting growth in the short run and mitigating the negative inflationary impact on the long-term GDP outlook. RON stability seems the main NBR priority, as weakness could lead to panic euroization given the geopolitical tensions. Similar to past crisis episodes, there is little-to-no fiscal headroom to support the economy, with rigid spending vs. fiscal revenues exceeding regional norms. The EC would likely be lenient on some military/refugee one-offs and accept deviation from fiscal targets while sticking to the medium-term consolidation path. Reforms agreed with the EC remain key to increasing the growth multiplier of public investments and ensuring long-term sustainable growth. There is a sense of urgency for political agreement on reforms before the window of opportunity closes ahead of the heavy election year in 2024. Needless to say, in the current environment, the reform push is unlikely to gather too much political enthusiasm. |
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General information
| Author | Erste Group Research |
| Date | 2022/03/09 |
| Language |  |
| Product name | CEE Country Macro Outlook |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | Romania |
| Currency in focus | Romanian Leu |
| Sector in focus | - |
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