15.09.2020

Romania will avoid the recession, and Bulgaria?

While for the second quarter of the year Bulgaria reported the largest decline in gross domestic product (GDP) since 1997, and experts expect the crisis in the country to continue, neighboring Romania may be in a better position to get out of the heavy situation caused by the pandemic, money.bg writes. Our northern neighbor was one of the worst hit by COVID-19 in Europe, but it is expected that it will be able to avoid entering a technical recession in 2020.

The Austrian Erste Group predicts that growth will recover in the third quarter after a sharp collapse in the middle of the year. The financial company expects Romania's GDP to grow by 5.9% for the July-September period and another 2% for the last three months of the year.

Meanwhile, in the second quarter of the year the decline in GDP was deeper than in Bulgaria - 12.3% in April-June for our neighbor compared to the first quarter with a decline of 10% for our country for the same period. The data on the performance of the economies for the months of July-September will be decisive, and with a new downturn the Bulgarian economy will enter a recession.

Erste Group confirms its previous forecast of a 4.7% contraction in the Romanian economy for the full year. Last month, the country's finance ministry said it expected 3.8% for 2020.

As for how the country will recover next year, experts say it will depend mainly on Bucharest's fiscal policy after the country's elections. Measures to limit the budget deficit and avoid downgrading the country will be crucial.

However, the bank forecasts that for the period 2022-2024, Romania's GDP will grow by 3.7%, 4.7% and 5.3%, respectively, and to a large extent this solid growth will be due to European funds for the new program period 2021-2027.

According to the latest forecast of the European Commission (EC), Bulgaria's economy will report a decline of 7.1% of GDP in 2020, and then will compensate part of its loss with a growth of 5.3 percent for the next.

It is clear from the Commission's summer forecast that the recovery of the Bulgarian economy from the pandemic may turn out to be slower than initially expected. The spring forecast, for example, stated that in 2021 GDP could grow by 6 percent.

Experts also believe that our country is already in the middle of a crisis, and it may take even longer to get out of it. According to the Bulgarian Chamber of Commerce, this may not happen in the next, but only in 2022.