OTP Asset Management Romania claims global recession will be avoided this year

OTP Asset Management Romania launches the market analysis “Outlook 2020”, at its IV edition, presenting the global and local economic retrospective for 2019 and the portfolio managers’ expectations regarding the investment opportunities and macroeconomic perspectives for 2020 .

The central ideas highlighted regarding the evolution of the financial markets Outlook 2020 are:

• We will avoid recession at global level this year;
• The relaxation of the monetary policy of the central banks will continue throughout 2020;
• The economic growth in Romania will slowdown up to 2.7% in 2020;
• Inflation in Romania will return to a level of 3% during 2020;
• The credibility and the success of the fiscal consolidation will be able to determine
• if the pressure on the EUR / RON exchange rate and on the yield curve will maintain in the future;
• We are still optimistic regarding the evolution of the bonds denominated in EUR and USD, as well as regarding the evolution of the Romanian shares;
• Regulated automatic saving, the long-term solution that can reduce risks and optimize capital increases.

In 2020, OTP Asset Management Romania expects a further slowdown in the global economy, but with no reasons to indicate a global recession.

Recent developments suggest that it is possible to see some of the uncertainty that caused the decline in 2019 to be eliminated.

The possibility of the UK’s disorderly departure from the European Union, through a “tough” Brexit, has dropped significantly after Prime Minister Boris Johnson’s agreement with the EU and the Conservatives’ decisive victory in the UK parliamentary elections. In addition, there was some trade enhancement in the form of a phase 1 trade agreement between China and the US, although here we cannot say that the dangers are completely avoided.

In 2019, there was a marking change in the policies of the European Central Bank towards a more relaxed direction, which is unlikely to change in the near future. Inflation is still far below the target, both in the US and in the Eurozone. The notable relaxation of the monetary policies of the central banks in 2019 will continue throughout 2020. This fact supports the global economic growth by reducing the loan costs, both for the private sector and for the governments.

As for Romania, OTP Asset Management Romania expects a slowdown in economic growth during 2020.

Romania’s economic growth could be around 2.7% in 2020, as fiscal policy is expected to tighten in line with the new government’s long-term intention to reach a 3% deficit. Lower wages and lower levels of employment in the public sector will negatively affect consumption. However, starting with September 2020, the significant increase in pensions will again start to fuel household expenses. In addition, export growth will slow down.

The consumer price index in Romania is expected to drop rapidly next year, although there are consistent risks in this regard. Under these conditions, we expect that inflation will probably return to about 3% by 2020.

In addition to already announced plans to reduce public employment, other measures are needed to reduce the deficit below 3%.

Fiscal policy has become a major risk factor for the Romanian economy, a problem that will remain on the wallpaper for the next time period. The credibility and success of the fiscal consolidation will determine whether the pressure on the EUR / RON exchange rate and the yield curve will continue in the future.