The World Bank has revised significantly the estimates of the Romanian economy’s advance this year, up to 0.3%, from 3.8% as estimated three months ago, but relies on a return to 4.4% in 2021, shows the updated economic forecast for spring 2020.
“The negative impact of the COVID-19 pandemic on the economy is expected to be substantial, at least in the first half of the year. Economic growth is expected to slow to 0.3% in 2020, from an estimated 3.8% before the crisis. However, the risk of a recession in 2020 is substantial and increasing as COVID-19 leads to the stopping of large segments of the European economy and disruption of global supply chains. Growth needs to be supported by fiscal stimulus at national and EU level,” stresses the World Bank, according to Agerpres.
Also, the international financial institution estimates that, given the measures needed to respond to the COVID-19 crisis, the fiscal deficit would worsen to 5.5% of GDP by 2020, compared to a planned level of 3.6 % of GDP. New pressures on the deficit would come from the new pension law which stipulates a 40% increase in pensions starting in September.
“Once the impact of COVID-19 will be gone, we expect the deficit to follow an adjustment path of at least 0.5% of GDP per year, in accordance with the excessive deficit procedure,” says the World Bank.