Lender BCR sees stronger growth, but also higher inflation and deficits in Romania

Romania’s second-largest bank BCR, part of Austria’s Erste Group, revised upward its projection for Romania’s GDP growth in 2019, from 3.1% to 4.5%, which is still one percentage point below the Government’s highly optimistic expectations for 5.5% economic advance.

BCR operated the revision in response to the stronger than expected growth reported in the first quarter of the year. However, the advance was achieved amid widening budget and current account deficits (4.5% of GDP last year already). Under these circumstances, the strong Q1 growth is not necessarily good news but rather a sign that the balances are deteriorating, BCR chief economist Horia Braun commented, according to Profit.ro.

In its monthly macroeconomic report, BCR also underlines the threat posed by rising inflation, after the annual rise in prices took Romania’s National Bank (BNR) by surprise in April. BCR revised upward its projection for the year-end inflation from 3.5% to 4%. BNR has also changed its inflation outlook and envisages even higher year-end inflation: 4.2%.

The exchange rate and interest rates will remain steady for the next couple of months, BCR believes, however warning that high inflation (above 4%) will increase the volatility on both money and foreign exchange markets.

(Photo source: Pixabay.com)