PIB-ul Romaniei, prognozat sa scada cu 4,7% in 2020, din cauza crizei coronavirusului

PIB-ul Romaniei este prognozat sa scada cu 4,7% in 2020, din cauza crizei coronavirusului, conform economistilor Erste Bank, actionarul majoritar al BCR. 

Declinul estimat al cresterii economice este sub nivelul din 2009, cand PIB-ul tarii s-a diminuat cu 7,1%, din cauza crizei financiare.

Prognoza Erste Bank:

Romania GDP growth to contract by -4.7% in 2020
The Covid-19 crisis is likely to lead to a large, short-lived, structural break in economic data series. It is likely to see a double-digit quarterly drop in real GDP growth in the second quarter, followed by a double-digit recovery in the next quarter helped by the huge fiscal and monetary stimulus domestically and abroad. For the whole year, we estimate a contraction of -4.7 this year. This will deteriorate the already weak public finances with budget deficit likely to widen to -7.3% of GDP.

Economic forecasting these days is subject to large uncertainties ranging from the duration and severity of the Covid-19 outbreak to the post-corona-crisis consumer behaviour. The lockdown to fight the coronavirus outbreak is likely to lead to large losses in most economic sectors. To assess the economic impact of the pandemic, we used a similar approach to European Commission (EC) Economic Paper (EP) 251 (link here). Out of all the scenarios we have looked at, the current one seems to have an above 50% probability, though things can change rather quickly turning the forecast outdated.

In terms of external demand, our forecasting assumption for Eurozone GDP is a -3.5% contraction this year. Assuming that the bulk of the supply shock which started around mid-March should fade-off by end of May, second quarter GDP could shrink by -15.2% q/q, with first quarter posting a -0.5% q/q contraction amid strong January and February high frequency hard and confidence data.

Recovery is likely to be initially sharp given the very supportive fiscal and monetary conditions both domestically and abroad aimed at reducing as much as possible the duration of the demand shock. The full recovery will take a few more quarters as some companies will not survive the shock and for others it could take time to get to full capacity and for rehiring process. Hence, unemployment is likely to be sticky and the full recovery of the jobs lost could take more than a year.

We expect third quarter GDP growth to jump +12.8% q/q, followed by a +0.7% sequential expansion in the last quarter of the year. Adding up, we project full year GDP contracting by -4.7 y/y. The recovery is likely to continue in 2021 which we expect to post a 3.9% y/y GDP growth, benefiting also from favourable statistical base effect and assuming some fiscal consolidation partially offset by accommodative monetary policy stance.

We use this opportunity to revise our end-2020 CPI forecast to 2.8% from 3.4% previously, mostly due to the steep drop in the oil price, but also incorporating a significant one-off demand shock. Despite the large demand shock, supply disruption is likely to keep Core inflation elevated and we forecast it at 3.8% by year-end. Real interest rates are likely to remain negative, though in line with other CEE countries.

The NBR seems committed to use whatever it takes to support a swift post-crises recovery and interest rates should fall further driven by ample liquidity conditions and more rate cuts in sync with the regional central banks. It looks challenging for the NBR to manage the currency while injecting more liquidity via quantitative easing. We believe that the central bank has the firepower to get over the current crisis. An expected correction of the current account deficit this year should also help alleviate the weakening pressure on the currency. We see 3M interest rate in the 1.00-1.50% area versus 3.00% previously and EUR/RON at 4.90 by year-end, slightly higher than previous forecast of 4.87. We see current account deficit narrowing to -3.5% this year versus -4.7% of GDP in 2019.

The sharp deterioration of growth outlook should increase budget shortfall by around 2.8ppt of GDP assuming that the semi-elasticity estimated in ECs EP 098 (link here) holds during stressed times. On top of this, one-off public spending could increase the budget deficit by up to 1.5ppt of GDP, while there is little room for savings of no more than 0.6ppt of GDP versus the budget plan by delaying some spending. Adding things together the fiscal gap could reach 7.3% of GDP this year. Risks are titled towards a wider budget deficit. In this scenario, debt-to-GDP ratio could rise by 6.1ppt to 41.5% assuming that the government taps its FX buffer.

Pre-corona-crisis, the rating agencies were looking beyond the electoral cycle for fiscal consolidation measures aimed at preserving Romanias investment grade. It remains to be seen if their approach has changed after the virus outbreak and subsequent sharp deterioration in the short-term growth profile and the debt metrics. We believe that the downgrade risk is materially higher due to Covid-19 crisis. This risk is started to be priced-in by the credit markets.

In the current environment things can change quickly, hopefully not for worse. We will update our crisis simulations as things develop. Stay tuned! And safe!