Pessimistic estimate for the Romanian economy: growth of 2.9% in 2022, unemployment of 5.4%

By Andra Beltz
The National Strategy and Forecast Commission (CNSP) revised down by 1.4 percentage points, to 2.9% the growth estimate of the Romanian economy for this year, from 4.3% as previously forecast.
In the spring version of the Medium Term Forecast, CNSP shows that the overlap of shocks (geopolitical context, successive increases in energy prices and altered global supply chains) exacerbates risks and uncertainties on the economy, while affecting short-term expectations and business behavior. .
The estimates published by CNSP are in line with the forecasts of the international financial institutions, which have significantly decreased the growth targets of the Romanian economy this year. Thus, the IMF recently estimated an advance of 2.2% for 2022, from 4.8% as indicated in the fall, while the World Bank indicated an even more modest growth for Romania’s GDP, of 1.9% .
The Forecast Commission explains in the quoted document that in the elaboration of the current version of the Spring Forecast for the period 2022-2025 it re-evaluated the evolutions of the macroeconomic indicators, in the context of the conflict triggered by the Russian invasion in and of the imposed international sanctions.
“The effects of the energy crisis and supply chain disruptions, manifested since the second half of 2021, have been amplified in the current scenario, taking into account the recent increases in international quotations for energy and agri-food products. The slowdown in economic activity at the European and global level, according to international institutions, is leading to a slowdown in the dynamics of the national economy. For the main partner countries in the euro area, the new forecasts have adjusted downward the dynamics of economic growth by more than 1.5 percentage points “, mentions CNSP.
According to the institution, the Russia-Ukraine conflict has led to a worsening of trade indicators in the context of high dependence on Russian gas.
On the other hand, the emergence of a new pandemic wave in China will exacerbate supply chain bottlenecks, mainly affecting the auto industry.
The National Strategy and Forecast Commission also mentions a positive factor, namely the mitigation of the pandemic shock, which led to the lifting of the restrictions starting with March and to an increase of the population mobility.
“In this context, the recovery of activity in the sectors most affected during the health crisis, such as the hotel industry or the transport sector, is expected. However, the risk of a new pandemic wave or mutations of the cold season remains. The analysis of the current macroeconomic context reveals an expected impact on the purchasing power of the population, as well as on the investment process and the activity of the economic agents “, underlines the source.
CNSP estimates for the current year are supported by above-average developments in construction and services activities, stimulated by measures to implement the PNRR, as well as by government measures to increase investment, but also by some services, such as IT activities, unaffected by the Russia-conflict. Ukraine or the energy crisis.
In terms of domestic demand, economic growth is based on a favorable contribution of gross fixed capital formation and private consumption, although the dynamics are attenuated compared to the previous forecast, while net exports are expected to reduce their negative contribution. Exports will increase by 4.4% in 2022 (5.1% in the Winter Forecast) and imports by 5.1% (5.9% previously).
For the current account deficit, CSNP foresees the maintenance of the indicator at high values ​​in the current year (-6.9% of GDP), against the background of a growing trade deficit, amplified by price increases. Positive corrections are expected in the medium term.
The estimated level of price growth is slightly higher than the previous forecasts, respectively 9.7% compared to 9.5% for the end of the year, and 10.1% compared to 9.9% as an annual average.
For 2022, the average gross earnings are estimated to increase by 9.7%, to a level of 6,120 lei.
The number of employees will record an increase of 1.6% given that, amid the slowdown in economic growth compared to the previous year, the other categories of the employed population, mainly self-employed, will face a marginal adjustment.
The BIM unemployment rate will continue to fall this year to 5.4%.
The draft budget for 2022 was set at the economic growth of 4.6%.