EBRD revises downward forecast for Romania’s growth

Growth in Romania will likely slow down from close to 7% in 2017 and 4.1% in 2018 to 3.2% in 2019 and 2020, reflecting higher perceived investment risk, tighter monetary policy, and growing external imbalances, according to the latest economic outlook of the European Bank for Reconstruction and Development (EBRD).

The updated outlook reflects a 0.4 percentage point cut in the bank’s forecast for Romania’s GDP growth rate this year, from 3.6% projected under the previous outlook in November.

The investor’s sentiment was hurt by the package of measures taken at the end of last year (emergency ordinance 114/2018) with a potentially significant negative impact on specific sectors including banking, pension funds, energy, and telecom. The Government softened some of the measures in March 2019, primarily those related to the banking sector, EBRD commented.

Meanwhile, macroeconomic imbalances have widened, with the current account deficit rising to 4.6% of GDP in 2018 (up from 3.2% in 2017) and the budget deficit reaching 3% of GDP on the back of looser fiscal policies. Inflation has also been a concern, reaching a five-year high of 5.4% in June 2018, well above the central bank’s upper target of 2.5% +/- 1 percentage point, before receding to 3.3% by yearend.

On the positive side, general government debt is still low by regional standards, at around 37% of GDP.

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