16.07.2021
BULGARIA, ROMANIA, CROATIA - WHOSE ECONOMY WILL GROW THE FASTEST?
The world economy is gradually recovering from the pandemic, and this is already being felt in both larger countries and smaller economies. EU member states have reopened their economies, which has immediately boosted the services sector. The recovery of consumption is already underway and will intensify in the coming months, the European Commission predicts in its summer economic forecast.
The EU Balkan countries are also feeling the positive change. Bulgaria, Romania and Croatia are showing enviable economic growth, the bad times seem to be behind them. Romania's economy will grow by 7.4% in 2021, putting it at the forefront of growth not only in the region but throughout the European Union.
The champion Romania
The Romanian economy has gained momentum in the first 3 months of the year, wages have risen, boosting consumption. Private consumption will remain very stable, supported by the lifting of restrictions, especially in sectors heavily affected by the pandemic, such as the arts, entertainment, restaurants and hotels.
Investment will remain strong, supported by both the private and public sectors, and industrial activity will expand in the coming months, as evidenced by the steady increase in orders. Romania's exports need to improve due to the ongoing recovery of the country's main trading partners, but the contribution of net exports to growth is expected to remain negative over the forecast horizon, the EC expects.
Inflation is also likely to rise due to high energy prices, as well as the recovery in demand. Annual consumer price inflation has risen from 1.8% in December 2020 to around 2.7% in April 2021 and is expected to average 3.2% throughout the year before declining to 2.9 % in 2022, predicted by Brussels.
Romanian Prime Minister Florin Chitu said Romania's economy would grow by nearly 7% in 2021 amid government policies that stimulate investment. In the crisis year of 2020, Romania's economic output shrank by 3.9% compared to 4.1% in 2019.
Stable Croatia
The Croatian economy will grow by 5.4% this year and 5.9% in 2022, taking advantage of boosting consumption, construction, industry and tourism prospects.
New jobs are being created in the hospitality, IT and construction sectors, supported by strong investment performance. Investment growth will accelerate throughout the year, for which the Recovery and Sustainability Plan will play an important role.
The tourist season in the country will remain well below the levels of 2019, but will be significantly better than last year. As a result, exports of services should show strong growth. Exports of goods are also expected to perform well, driven by strong demand from key trading partners. Inflation remains low, but is expected to continue to rise, driven by services and processed foods. The EC expects it to increase by 1.5% this year and 1.3% in 2022.
However, Croatia has something to catch up with, as the country's economic output shrank by as much as 8% last year. Its economy was among the hardest hit by the crisis, along with those of Spain, Italy and Greece.
Unsure Bulgaria
Bulgaria's economy will grow by 4.6% in 2021, visibly weaker than Romania and Croatia, but still 1.1 percentage points higher than previously expected. Moderate growth of just over 4% will continue in 2022. Growth in Bulgaria is slightly below the EU average (4.8%), significantly lower than in Hungary and Slovenia, but close to that in Slovakia, Estonia and Poland.
Despite the constraints associated with the pandemic, real GDP grew by 2.5% on a quarterly basis in the first 3 months of 2021, mainly due to exports and private consumption. Bulgaria's economic output fell by 1.8% on an annual basis in the first quarter of 2021, after an annual decline of 3.8% in the fourth quarter of 2020, according to the NSI.
Consumer demand may be stronger than expected, but due to the slow vaccination against COVID-19, there is a danger of a new blockade by the end of the year.
In 2022, household consumption is expected to continue to increase, in line with the improving labor market situation. Exports of goods and services will also increase due to rising external demand and the lifting of restrictive measures. The implementation of the Recovery and Sustainability Plan will support investment in 2022.
Inflation is set to accelerate to 1.9% in 2021 due to expected higher energy prices and some side effects of higher fuel prices. Non-energy industrial goods and processed foods are also projected to maintain stronger price dynamics. In 2022, consumer price inflation is expected to reach 2.5%, supported by aggregate demand.
