The European Commission (EC) under its Winter Forecast sticks with the projections for an economic slowdown in Romania during 2019-2020 and forecasts 3.8% GDP growth this year followed by 3.6% advance in 2020. The GDP increase could have hit 4.0% in 2018 (compared to 3.6% predicted in November), the EC admitted, but it is expected to ease in the coming years with “the risks to the forecast being clearly on the downside.
” Besides a potentially negative impact on credit, the Government’s emergency ordinance in December (114/2018) could have a much broader effect, the EC reasons. For example, significantly higher unpredictability of the business environment in Romania may have an adverse knock-on effect on investment decisions. When it comes to the baseline scenario, the composition of growth is expected to remain somewhat stable, with private consumption still the primary driver.
However, the evolution of investment in 2019 will largely depend on the impact of policies introduced in December 2018, the EC warned. The contribution of net exports is expected to remain negative, but progressively less so in 2019 and 2020, the EC Winter Forecast reads without explaining the causes of the narrowing external deficits -- with the exchange rate and weaker domestic demand being the leading candidates.
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Romania's draft budget for 2019 targets “a moderate fiscal tightening” to a 2.6%-of-GDP deficit, down from 3% in 2018...