The worsening of the pandemic situation with the onset of the cold season is expected to lead to the reintroduction of relatively widespread administrative measures of social distancing both internally and externally, affecting the economy in the last quarter of the year, according to the Inflation Report of the National Bank of Romania.

“The worsening of the pandemic situation with the onset of the cold season is expected to lead to the reintroduction of relatively widespread administrative measures of social distancing both internally and externally, expected to extend over a period similar to the first part of this year, affecting with greater intensity the evolution of the economy during the fourth quarter. The decline in economic activity forecast for this quarter, although significant (quarterly decline in real GDP for both Romania and its main trading partners in the EU), is still lower as intensity compared to the crisis in the second quarter of 2020, given the experience gained by the authorities in managing the crisis, as well as adapting the behavior of economic agents. However, the annual growth rates of domestic GDP are projected to remain below those in the baseline scenario by the end of next year, a significant blow coming from the unfavorable evolution of the external demand of Romanian products, as well as of a probable generalization of the reluctant behavior of consumption from the households and, respectively, of investments from the companies,” says the Report, according to Agerpres.

The NBR mentions that the deterioration of economic activity compared to the baseline scenario is anticipated to reflect developments in all components of GDP. Thus, an increase in uncertainty, with an impact in the sense of a higher level of the risk premium and, implicitly, of the exchange rate of the leu, including in the context of the unfavorable outlook that is emerging in terms of the evolution of twin deficits, is expected to affect investment dynamics in the economy (and, in these conditions, the trajectory of the Potential GDP), but also that of private consumption. The latter will feel the developments in the labor market, with the effect of compressing the disposable income, respectively larger increases in the unemployment rate, in parallel with a reduction in the number of vacancies.