OTP sketches gloomy forecast for Romania’s economy

Romania’s GDP will increase by 3.5% this year, more than the most pessimistic scenarios drafted by independent analysts but far from the 5.5% official forecast of the Government, according to the analysts of Hungarian group OTP’s assets management division, News.ro reported.

The investments will perform modestly as the impetus driven by the better EU funds absorption and by companies’ investments in technology (amid tighter labor market) will be partly offset by subdued investments in the sectors of energy and telecommunications, two sectors particularly hurt by the emergency ordinance (OUG) 114/2018, OTP’s analysts believe. The consumption will thus remain the main growth driver.

At the same time, in the medium term, a modest increase in the monetary policy interest rate by Romania's National Bank (BNR) may be necessary to maintain inflation within the targeted interval, according to OTP. The rate hike is put in a global context by OTP’s analysts: “starting with 2018, the era of ultra-relaxed monetary conditions seems to have ceased. Higher interest rates in the US and dollar’s strengthening have led to tighter financial conditions around the world, generating adverse effects of contamination, especially in emerging economies with weaker economic fundamentals”.

Moreover, the eurozone also saw an unexpected slowdown amid fears about Brexit, but also due to production difficulties in the car industry or massive protests of "yellow jackets" in France, according to OTP.

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