Romania
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Economic development and outlook
The Romanian economy contracted by 3.9 percent in 2020. Trade and services decreased by 4.7 percent, while certain sectors, such as tourism and hospitality, remained heavily affected. Industry contracted by 9.3 percent, reflecting weakened external demand and supply chain disruptions. The biggest contraction was seen in agriculture, linked to persistent droughts affecting crops. The unemployment rate reached 5.5 percent in July 2020 before edging down to 5.3 percent in December.
Rapid household assessments of the impact of the COVID-19 pandemic showed a substantial rise in the share of the population at risk of poverty in April 2020, which gradually declined until January 2021, as temporarily inactive workers returned to work. Poverty levels at the start of 2021, however, remain elevated, linked to the combination of the sharp agricultural contraction and the persistence of the pandemic.
The Government provided a fiscal stimulus of 4.4 percent of GDP in 2020 in response to the COVID-19 crisis. In the first COVID wave, poor and vulnerable households were less supported by the fiscal response measures, which extended more directly to those in formal employment structures; subsequent programs for daily wage and seasonal workers extended protections to typically more vulnerable segments.
The economy is projected to grow at around 4.3 percent in 2021. The strength of the recovery will depend on the success of the COVID-19 vaccine rollout and the policy response to the health crisis, as well as on developments in the EU. In view of the limited fiscal space, the impact of the EU-level stimulus will play a crucial role in the economic recovery. Romania is expected to receive €79.9 billion from the EU by 2027 under the Multiannual Financial Framework 2021–2027 (€49.5 billion) and the economic recovery plan (€30.4 billion).
A substantial reduction of the fiscal deficit in 2021 is improbable, as the Government will have to support the economic recovery process. Over the medium term, the deficit will follow a downward trajectory but is likely to remain above 3 percent throughout the projection period. The widening fiscal deficit would push public debt to 62.2 percent in 2023 from 37.3 percent in 2019. However, public debt remains one of the lowest in the EU.