Romanian Govt. sticks with 5.5% growth projection, admits higher inflation this year

Despite independent forecasts converging to a GDP growth rate of around 3% this year, Romania’s Government-supervised forecasting body CNSP (which was recently given planning function including active involvement in investment projects) maintained the 5.5% growth projection in its May 6 Spring Forecast. The figure is the same as the one CNSP included a couple of months earlier in the Winter Forecast.

CNSP admitted that the inflation outlook has deteriorated and revised the inflation forecast and the exchange rate forecast upward, but it sees local currency’s weakening as temporary and limited.

CNSP has revised its year-end inflation forecast for this year to 3.2% (up from 2.8% under Winter Forecast) and 2.8% for 2020 (2.5% in Winter Forecast). Notably, the current forecast of Romania’s National Bank (BNR) for the year-end inflation is 3.0%, but the outlook will likely be revised in this month’s Quarterly Inflation Report.

CNSP also raised forecasts for the average EUR/RON exchange rate to 4.74 (year’s average), from 4.67 in the Winter Forecast and to 4.71 for 2020, from 4.62. The exchange rate will return to 4.67 in 2022, according to CNSP. The forecast thus implies temporary and moderate exchange rate correction, while independent analysts believe a permanent correction of a larger magnitude is more likely.

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