MACROECONOMIC OUTLOOK FOR ROMANIA

Last year, Romania’s economy shrank by 3.9%, nonetheless a less severe shrinking compared to the GDP decline across the European Union by -6,1% and taking into account the measures adopted by the Romanian authorities in order to counter the negative eff ects of the COVID-19 pandemic. The forecasts for this year mention economic growth by 7%, so that we have been witnessing a “V”-shaped economic recovery in Romania.

The economy’s recovery in S1 2021 had a brisk pace compared to the pace initially expected, being given momentum by the domestic demand which supported growth in Q4 2020 as well. In 2020, in Romania, GDP/capita stood at €8,780, which was 1/3 of the UE27 average of €26,290, down compared to 2019, taking into account the economy’s shrinking in the context of the pandemic. The data on lending show an advance in non-government credit by 5.5% in 2020 to €58 billion. Thus, paradoxically, we have been seen an increase in fi nancial intermediation up to 26.8% in 2020, from 25.3% in 2019.

In Romania, fi nancial intermediation is below the one in the countries of the region such as Hungary (35%), being even double in countries such as Poland (48%), Bulgaria (52%) or the Czech Republic (54%), while the European average is 92%. This year, lending is expected to go up by 8%, being spurred on by corporate lending.

In December 2020, the annual CPI infl ation rate reached 2.63%, a level under the one reported in 2019, i.e. 3.83%. Exogeneous factors such as more expensive fuel have made the annual infl ation rate go up in August 2021 to 5.25%, above the forecast level and above the upper limit of the interval targeted by the National Bank of Romania. The NBR stable infl ation target is 2.5 % ±1 %. Similar trends have been reported in the countries of the region.

Last year, the general budget execution was closed with a defi cit of over 9.8% of the GDP, double compared to 2019, contemplating the expenses to combat the pandemic eff ects and the fi scal facilities, while the country’s public debt reached 49.7% of the GDP. During 2020, the current account of the balance of payments had an €11 billion defi cit. The tensions in macroeconomic balances, including the COVID-19 pandemic eff ects, represent a severe systemic risk, says the NBR report on Financial Stability 2021. The default risk on the loans granted to the non-government sector represents a high systemic risk, while the risk regarding access to fi nancing the real economy is a moderate systemic risk.

Romania has had one of the fastest drops in the NPL rate among European countries, the drop happening almost 6 times in 7 years, down to 3.83% at the end of December 2020. The developments in the NPL rate depend on the recovery pace of Romania’s economy – contemplating the healthcare crisis – and on the fi – nancial redress capacity of the debtors who benefi ted from the public and private moratoria.

At national level, the programmes to support employment have reached their aim of limiting the pandemic’s eff ects, so that the unemployment rate kept being low, i.e. 3.4%.

After 14 years since the integration in the European Union, Romania is the state ranking last in the EU as regards fi nancial inclusion (67%), fi nancial intermediation (26.8%), the level of fi nancial education (22%) and, with some exceptions, the level of economic welfare. Romania can migrate toward the group of EU countries where the GDP/capita is almost €20,000, but we still have a long way to go. We should adopt a speed which could bring us a convergence advantage, namely our fare speed should be faster than the speed of the group we have been chasing.