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CNSP revised upwards at 7% the estimate regarding the advance of the Romanian economy in 2021


The National Commission for Strategy and Prognosis (CNSP) revised upwards, at 7%, the estimate regarding the advance of the GDP in 2021, at 1,174.9 billion lei, according to the summer prognosis of the institution for 2021-2025

CNSP estimated, in the spring prognosis, a growth of the GDP for this year of 5% at 1,142.9 billion lei.

The Commission also estimates a deficit of current account of 5.5% of GDP in 2021, 5% in 2022, 4.7% in 2023, in 2024 and 4.2% IN 2025.

According to the summer prognosis, the indicator of consumption prices (IPC) at the end of the year will be in 2021 at 5% and the annual average inflation is    estimated this year at 4.2%. The annual average inflation would drop at 3.5% in 20222, at 3% in 2023, at 2.6% in 2024 and 2.5% in 2025.

CNSP estimates that the average of the foreign exchange lei/euro will be this year at 4.92, at 4.98 next year, at 5.03 lei for euro in 2023, at 5.08 lei for one euro in 2024 and 5.13 lei for one euro in 2025.

‘Taking into consideration the economic evolutions in the first months of 2021, as well as the lifting of the majority of the restrictions imposed by the pandemics, it is expected that GDP will have a nominal value of 1,174.9 billion lei in 2021, result of a real growth of 7% and deflator of 4% (the evolution of the prices upwards has contributed to the revision of the GDP deflator) the prognosis shows.

According to the institution, at sectorial level it is estimated that services will continue to a considerable advance in the second part of 2021, so that the growth of the gross added value be significant ( including a basic effect as well) of 6.3% with 2.4 percentage points superior to that of the previous estimate.

As regards industry, the advance of activities with increased value of added value is expected, due to new relaxation conditions, to have determined the upwards revision by 1.9 percentage points of the VAB dynamics ( gross added value, n.r.) in industry, at 7.7% the coming back being partially compared to 2019.

At the same time, according to CNSP, the unfavourable effects of pandemics affected less the work market where, in 2021, a coming back of the average number of employees is expected at 5,162 million people (5,164 million in 2019) up by 72,000 people, namely 1.4% against the previous year and higher by 0.1 percentage point as compared to the estimates of January 2021 (5.158 million people).

The gross average salary income for 2021 was revised at 5,520 lei/month, an adjustment of 1.9 percentage points against the estimate from the spring prognosis (5,422 lei/month) as a result of the positive impact of economic growth which will determine the increase by 6.9% against 2020. CNSP mentions the fact that the data regarding the work force are still estimated for 2020, in August to have the new values published by INS.

While referring to risks associated with the prognosis, most obvious are those connected to the unpredictability of the international economic environment for the last four months of the current year, in the context of the high probability of the fourth wave of the Covid pandemics. At the same time, the institution mentions the factors of influence associated with the evolution of the economy of the euro zone and mainly, of Germany (the main commercial partner of Romania) whose situation is reflected in the area of demand aggregated through exports, especially in the area of domestic industrial production.

In the present context of high economic growth, although the export of goods is expected to recover the decline of the previous year, the deficit of the commercial balance is estimated to deepen being the main cause for the alteration of the balance of current account.

Thus, the deficit of current account in GDP is expected to get worse, from 5.2% in 2020 to 5.5% in 2021. There is the possibility of risk generated by the possible negative climatic effects on agriculture, which could diminish the real growth mentioned unchanged against the spring prognosis (+14.8%).

On the other hand, there is the domestic risk of increase of prices of goods, fuel and energy, supplementary pressure on the competitiveness of domestic production.

In the first months of current year registered growth of price both for the industrial production (6.18%, the average of the first quarter) as well as in the case of costs in constructions (5.9% in the first five months) at a superior level of the one anticipated at the beginning of the year.

‘The increase was caused both by the increase of the international price of oil and of the quotations of raw materials. For consumption prices, the growth of the first seven months was at 3.58%, the estimate for the current year being revised at 4.2% for the annual average and 5% for the inflation at the end of the year’ according to the CNSP  analysis.

The medium term scenario 2022 – 2025 considers a slight acceleration of the economy as compared to the scenario of spring prognosis taking as main hypothesis the positive impact of European funds in PNRR.

At the same time, a simulation of CNSP in the hypothesis of absorption of 29 billion euro between 2021 – 2026, shows a positive impact which generates supplementary economic growth of almost 0.9 percentage points on average during the whole interval, against the basic scenario, without PNRR but with other European funds. ‘ In the first part of the interval (2021 – 2022) the impact is less pronounced, the maximum effect on the acceleration of GDP growth taking pace in 2023 – 2024 (+1.6/1.5 percentage points) as the allocation of the funds increases gradually’ the institution analysis says.

According to the quoted source, the economic model for medium term is similar to that of spring prognosis, the surplus of growth being determined by the allocation of public and private investments. The average dynamics of FBCF (the gross formation of fix capital) will be almost 9% in 2021- 2025 which will become an average contribution of 2.4 percentage points to the real dynamics of GDP.

CNSP says that the standard estimates are that of spring and autumn, the summer estimate being an intermediary one, with limited extension of the macroeconomic indicators.