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The recovery of the Romanian economy will continue in the first half of this year, yet with a considerable slowdown in Q1, followed by a modest acceleration in the second quarter, similar to previous assessments, show the minutes of the monetary policy meeting of the National Bank of Romania's Board from May 12, 2021.
Against this background, thanks to the comeback of the economy in H2 2020, the GDP loss recorded in the second quarter of 2020 could be largely recovered in mid-2021 alongside the full closing of the negative GDP gap, Board members underlined, as cited in the BNR minute.
According to the cited source, the slower economic recovery in early 2021 was deemed to have been uneven from the perspective of aggregate demand components and at sectoral level, amid the mixed developments recorded in the first months by the most relevant high-frequency indicators. Thus, retail trade posted a mildly faster increase in annual terms in Q1 and the annual dynamics of motor vehicles and motorcycles sales witnessed a strong return to positive territory January through February; at the same time, market services to households recorded a lower contraction (by almost a half) in annual terms, amid the easing (at least for a while) of some restrictions on the hospitality industry.
By contrast, the BNR notes - the volume of construction works dropped slightly in annual terms over January - February and the dynamics of the industrial output moved again deeper into negative territory, concurrently with the slower growth in new manufacturing orders, while net direct investment continued to shrink from the same period of the year before, albeit entirely on the back of intercompany lending.
As to the expected private consumption dynamics - which is key to the forecasted economic growth - the BNR states that is will nevertheless remain visibly lower than the pre-pandemic years' average across the forecast horizon, despite the major statistical effect in 2021 and the pent-up demand that would probably surface in the short run, as mobility restrictions are progressively eased, Agerpres informs.
Net exports are also seen diminishing their contractionary impact more markedly in the current year and very modestly in 2022, given the relative step-up in external demand, alongside the more solid increase in domestic absorption.
The Board members agreed that uncertainties about the new forecast and the risks thus induced to the inflation outlook remain considerable, stemming mainly from the evolution of the pandemic and of the restrictive measures - especially in the latter part of 2021 -, largely dependent on the extent and effectiveness of the vaccination process domestically, across Europe and worldwide.
