Romania’s economy will grow modestly by 1.9% in 2022, as the risks from the Ukraine crisis are high, the World Bank said in a report released on Sunday.
In addition, the fiscal deficit will remain high at around 6.6% of GDP, despite some consolidation measures.
“The magnitude of the recovery will depend on the evolution of COVID-19 variants and the severity of hostilities in the region. Romania’s ability to absorb EU funds will be crucial for a sustainable, green and inclusive recovery process,” the World Bank said.
The international financial institution estimates that a substantial reduction in the fiscal deficit in 2022 is unlikely, as the government will have to support the recovery of the economy. In the medium term, however, the deficit is expected to follow a declining trajectory, but is likely to remain above the 3% of GDP threshold.
The World Bank also expects the poverty rate (inflation +unemplyment) to fall slightly to 10.1% in 2022, returning to pre-crisis levels in 2024. However, rising food and energy prices and declining remittances, it could mean a longer recovery for vulnerable segments of the population compared to others in the coming years.
On the other hand, a prolonged war in Ukraine could lead Romania’s economic growth into negative territory and lead to short-term poverty growth, the World Bank points out.
The World Bank Group, one of the largest sources of funding and expertise for developing countries, is taking swift and complex steps to help developing countries strengthen their response to the challenges posed by the pandemic.