The World Bank announced on Wednesday that Romania‘s gross domestic product (GDP) is expected to grow by 7.3% in 2021, improving its June forecast by 1.3 percentage points, according to See News.
For next year the World Bank expects the Romanian economy to expand by 4.8%, a higher estimate than the previously projected 4.5% rise in GDP, the lender said in its Europe and Central Asia Economic Update Fall 2021 report published on Tuesday.
Romania’s 2021 economic advance, amongst the highest in the EU, is mainly due to the recovery in domestic demand, the bank noted, adding that the strength of the recovery will depend on tackling the low vaccination rate, which reflects high vaccine hesitancy, the evolution of the Delta variant, and the policy response to the health crisis.
Romania’s capacity to absorb the EU funds will be critical to a sustainable recovery process. According to the report, in a scenario of 100% absorption of the Resilience and Recovery funds, Romania’s real GDP growth will on average rise by one percentage point per year between 2021 and 2026.
The World Bank expects Romania’s fiscal deficit to remain high in 2021, at around 7.4% of GDP but adds risks are tilted to the upside as the recent budget revision increased the planned expenditures by 1.6% of projected GDP while being overly optimistic as to revenue increases.
The bank advises that renewed attention should be given to fiscal consolidation to avoid an unsustainable increase in public debt over the medium term.
The bank’s estimate for economic growth in 2021 is slightly more optimistic than the government’s, which forecasts a 7% rise in economic output.