EDITORIAL - Uncertainty takes toll on economic growth
At the same time, the upside risks for this year’s inflation have increased,' Erste Group Research notes in its report.
As for Central and Eastern Europe, the report emphasizes that direct trade links with Russia, Ukraine and Belarus are generally low (close to or below 6% of total imports/ exports), but "the region is highly dependent on Russian gas and oil imports."
"Uncertainty and high inflation will weigh on household consumption and investments, compounded by direct and indirect trade impact from the war and sanctions, as well as by already existing shortages along the supply chain. Thus, CEE8 growth should average 3% this year. Once the situation improves, GDP growth may speed up to 4.1% on average in 2023, supported also by Next Generation EU funds," according to the report.
Meanwhile, Fitch Ratings has affirmed Romania's long-term foreign and local currency issuer default ratings (IDR) at 'BBB-', with a negative outlook. Listing the short term challenges, the ratings agency points out that "the Russian invasion of Ukraine represents a significant macro headwind, as it will heighten short-term risks to growth and inflation, and to a lesser extent, to public and external finances." However, "steep increases in commodity prices, supply side disruptions and weaker growth in Romania's main trading partners (mainly the eurozone) will have significant spill overs, heightening short-term risks."
According to Fitch, Romania's GDP growth is expected to slow to 2.1% in 2022 (from 5.9% in 2021), mainly due to a reduction in private consumption and exports. "We expect public investment to provide some momentum in 2H22, in line with higher absorption of the 2014-2020 Multi Annual Financing Framework and from the Recovery and Resilience Fund (RRF). In 2023 we expect investment dynamics to further accelerate, which combined with our assumption of a normalisation of external trade and supply chains, will lift growth to 4.8%."
Find more opinions and predictions about domestic and global economic and geopolitical trends in this edition of Business Arena. As always, we will continue to keep an eye on all the issues affecting the business community.
As for Central and Eastern Europe, the report emphasizes that direct trade links with Russia, Ukraine and Belarus are generally low (close to or below 6% of total imports/ exports), but "the region is highly dependent on Russian gas and oil imports."
"Uncertainty and high inflation will weigh on household consumption and investments, compounded by direct and indirect trade impact from the war and sanctions, as well as by already existing shortages along the supply chain. Thus, CEE8 growth should average 3% this year. Once the situation improves, GDP growth may speed up to 4.1% on average in 2023, supported also by Next Generation EU funds," according to the report.
Meanwhile, Fitch Ratings has affirmed Romania's long-term foreign and local currency issuer default ratings (IDR) at 'BBB-', with a negative outlook. Listing the short term challenges, the ratings agency points out that "the Russian invasion of Ukraine represents a significant macro headwind, as it will heighten short-term risks to growth and inflation, and to a lesser extent, to public and external finances." However, "steep increases in commodity prices, supply side disruptions and weaker growth in Romania's main trading partners (mainly the eurozone) will have significant spill overs, heightening short-term risks."
According to Fitch, Romania's GDP growth is expected to slow to 2.1% in 2022 (from 5.9% in 2021), mainly due to a reduction in private consumption and exports. "We expect public investment to provide some momentum in 2H22, in line with higher absorption of the 2014-2020 Multi Annual Financing Framework and from the Recovery and Resilience Fund (RRF). In 2023 we expect investment dynamics to further accelerate, which combined with our assumption of a normalisation of external trade and supply chains, will lift growth to 4.8%."
Find more opinions and predictions about domestic and global economic and geopolitical trends in this edition of Business Arena. As always, we will continue to keep an eye on all the issues affecting the business community.
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