EBRD improves its economic growth forecast for Romania

Romania's economy is expected to have one of the highest increases in emerging Europe pushed by stronger growth in the Eurozone, according to EBRD’s latest Regional Economic Prospects report, released on Thursday, May 14. According to EBRD estimates, Romania’s GDP is expected to grow at around 3% in 2015 and 3.2% in 2016, following 2.8% growth in 2014. The financial institution upped its estimate for this year, from 2.8% in the January 2015 forecast. Romania’s economy grew by 4.3% in the first quarter of 2015 compared to the same period of last year. Recent and prospective interest rate cuts in Romania, enabled by inflation falling on the back of energy and food prices, will continue to boost domestic demand in 2015 and 2016, the EBRD report shows. The rising industrial confidence and the deprivation of inventories may also lead to an increase in investments after two years while a recent reduction in non-performing loans (NPLs) following proactive provisioning policies by the central bank is expected to help credit supply. EBRD also expects the Government to increase expenditure to support the EU funds absorption, which is the lowest in EU. Annual average inflation is expected to remain at an average of 0.5% in 2015, on the back of cuts in VAT on food products, as well as low inflation expectations and lower commodity prices. Romania’s central bank recently announced it expected zero inflation in 2015. EBRD’s latest Regional Economic Prospects report predicts overall stagnation in 2015 across all 35 countries covered, as growth in the Central and South-Eastern European countries is expected to be offset by the recession in Russia and the neighboring countries. Read the full report here. editor@romania-insider.com