The surplus in services (4.2% of GDP), which is attributable to the IT sector, outsourcing and transport, will not be enough to ensure a balanced trade balance. Even so, the current account deficit is expected to stabilise in 2022. In 2021, the recovery in domestic demand boosted import volumes, largely offsetting a strong rebound in exports and causing the trade deficit to widen (-9% of GDP in 2021). However, political divisions could undermine fiscal consolidation. Public debt (52% external) will continue to increase, but should remain moderate. Thanks to these European funds, 14% of which were paid out in 2021, the budget deficit should shrink in 2022. Public finances will benefit from record aid of more than 24% of GDP over the 2021-2027 period under the EU’s Multiannual Financial Framework and Next Generation Recovery Plan. Supported by the economic recovery, public revenues are expected to stabilise at around 30% of GDP, while public expenditure, benefiting from the moderation of pensions and public wages, is set to decline to account for only 36% of GDP. The fiscal consolidation that began in 2021 should continue in 2022. Given the low vaccination rate of the population and the fragility of the health system, which suffers from dilapidated hospital infrastructure (made worse by three fires in 2021), the health crisis, which depressed growth in the last quarter of 2021, will remain a major risk to economic stability in 2022. The fourth wave of COVID-19, which appeared in early October 2021 following the rapid spread of the delta variant, was the deadliest since the beginning of the epidemic. Contrasting with brisk services and cereals exports, exports of electrical components, telephones, machinery, and motor vehicles and parts (42% of exports) will struggle, particularly with the persistent shortage of semiconductors. Exports will depend on the recovery of European partners (more than 75% of trade is intra-EU), particularly Germany, which absorbs 23% of Romanian exports. Net exports should make a negative contribution to growth again in 2022, as supply chain disruptions are hurting exports, while buoyant domestic demand and rising energy prices will increase the import bill. ![]() After hiking its main policy rate to 1.5% in October 2021, the National Bank of Romania is expected to continue tightening monetary policy in 2022 in order to bring inflation back to its 2.5% +/-1pp target window. Furthermore, rising energy prices, coupled with a recovery in domestic demand, stoked inflationary pressures in 2021, with record inflation of over 5% in September. However, in a tense political environment, the effectiveness of these investments, which are concentrated in infrastructure, will depend on the absorption rate of European funds, which is still below the regional average due to administrative shortcomings. Under the National Recovery and Resilience Plan (NRRP) approved by the European Commission in September 2021, Romania stands to receive nearly EUR 29 billion (12% of GDP) by 2027, in addition to structural funds (12% of GDP) provided in particular to upgrade the country's infrastructure. Domestic investment (25% of GDP) will be supported by the resumption of EU-financed projects, provided the Romanian Parliament approves them. Household consumption (63% of GDP), although brisk, will remain constrained by a persistently high unemployment rate (5%) and soaring energy prices. In 2022, domestic demand will remain the main driver of growth, but the pace is set to slacken. ![]() Thanks to the recovery in household consumption, the economy rebounded strongly in 2021, with significant growth of 13% in the second quarter, allowing GDP to return to pre-crisis levels. RISK ASSESSMENT Recovery set to decelerate in 2022
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