The Romanian economy is expected to contract by 5.7% in 2020, but will rebound by 4.9% in 2021, according to the latest update of the World Bank’s Economic Update for Europe and Central Asia (ECA) published on Wednesday by the international financial institution.

“The severity of the recession and the magnitude of the recovery in 2021 will depend on the evolution of the health crisis and the response of decision makers, the impact of economic incentives and the consequences of incentives adopted at EU level,” the World Bank said, according to Agerpres.

Also, to respond to the consequences of the COVID-19 pandemic, the World Bank expects the fiscal deficit to reach 9.1% of GDP in 2020, from a planned level of 3.6% of GDP before the crisis.

“A substantial reduction in the deficit in 2021 is unlikely because the government will have to support the process of economic recovery,” the World Bank said. The institution is betting on a deficit of 6.3% of GDP next year.

Regarding the risks and challenges that Romania will face, the World Bank claims that, in the short term, the main challenge is to keep the COVID-19 crisis under control and to limit its economic and health consequences. “A protracted crisis with additional mitigation measures to reduce transmission would reduce growth prospects and delay early recovery, raising unemployment and poverty at the same time,” the World Bank said.

Overall, the World Bank expects a decline of up to 4.4% in emerging and developing economies in Europe and Central Asia this year. It is estimated that the growth process will recover in 2021, by 1.1% – 3.3%. However, the outlook remains uncertain and there is a risk of underperformance.