Economic growth will slow down in 2020, “Expert-Grup”

30.01.2020 13:27
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The pace of economic growth in 2020 will decline compared with 2019, from 4.5-5% to 3.5-4%. Most of the sectors will witness slow growth paces, with the slowdown in the building sector being the most evident one, the Independent Think Tank “Expert-Grup” says in the biannual publication MEGA that is quoted by IPN.

According to the executive director of “Expert-Grup” Adrian Lupușor, the positive effects of the fiscal reform seen in 2019 will fully dissipate in 2020 and will determine a slowdown this year. The economic growth slowdown in the EU and the CIS will also have an impact.

“We anticipate that imports this year will grow faster than exports. Therefore, the problem of the balance of payments deficit, the current account deficit will become even more relevant as the deficit this year will exceed 10% of the GDP, which is a rather worrisome level for us,” stated Adrian Lupușor.

He noted that the deceleration of economic growth will exert pressure on the public finance system, entailing particular risks. In 2020, the growth rate of budget revenues will be slower and this will lead to a budget deficit of over 3% of the GDP, which is almost twice more than in 2019. “The financing of the budget deficit in 2020 will be one of the main challenges with which the government will have to cope,” stated Adrian Lupușor.

Given the expected constraints, implicitly the expiry of the memorandum with the IMF, the government will have to come up with a series of alternative measures for attenuating the budget deficit. If a part of the budget expenditure is cut, the deficit will decrease to about 1.5% of the GDP. Among other measures are the issuing of Eurobonds and acceleration of privatization.

“If the government reduces the budget deficit from the planned 3% to about 1.5%, which we consider more sustainable, the economic dynamics will not be negatively affected and the sustainability of the public finance system will be thus ensured,” said the director of “Expert-Grup, noting many of the enterprises will only gain if they are privatized and benefit from private investment, but the privatization process should be transparent and competitive.