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Romania:economic activity forecast for 2023 revised downward

Board of Directors of the National Bank of Romania (BNR)

20 August, 17:16
(ANSA-ROM) - ROMA, 20 AGO - According to the minutes of the August 5, 2022 monetary policy meeting of the Board of Directors of the National Bank of Romania (BNR), forecasts for economic activity were revised considerably upward for 2022, but exclusively as a result of its far higher than expected growth in the first quarter, and downward for 2023.

The context is the one of a stronger negative impact assumed to be exerted by the war in Ukraine and the imposed sanctions, only partially offset by the effects of the absorption of European funds related to the Next Generation EU instrument. The development implies an inflexion in the trend of the GDP gap, which, after re-amplifying its positive value beyond expectations in the first quarter of 2022, is expected to narrow relatively quickly and gradually fall into negative territory starting in the third quarter of 2023," the paper published on Friday said.

According to the BNR, the main determinant of GDP advance is likely to remain private consumption, under the conditions of a significant acceleration of its growth in 2022 - attributable almost entirely to the unexpectedly strong dynamics during the first quarter, followed by a pronounced decline in dynamics in 2023, also under the influence of the gradual increase in interest rates on loans and deposits of the population. From the point of view of net exports, a significant negative contribution to GDP dynamics is also likely in the current year - against the backdrop of the pronounced slowdown in economic growth in the EU and the substantial rise in commodity prices, as well as a neutral impact in 2023, given a tempering of the advance of imports, in correlation with the development of domestic absorption.

Therefore, the current account deficit is expected to continue to increase as a percentage of GDP in 2022, even under the influence of further deterioration of import price developments relative to export price developments, and in the following year it is expected to decrease only slightly. In addition, the absorption of European funds, especially those related to the Next Generation EU program, is contingent on the completion of strict targets and milestones in the implementation of approved projects, Council members repeatedly stressed, but it is essential to achieve the required structural reforms, including that of the energy transition, as well as to offset, at least in part, the counteracting impact of supply-side shocks, amplified by the war in Ukraine. (ANSA-ROM).

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