Garanti Bank revises up Romania’s GDP growth forecast for this year

Garanti Bank revised up Romania’s Gross Domestic Product GDP growth forecast for 2014, from 2.6 percent to 2.9 percent, in its latest Quarterly Macroeconomic Report. The change was mainly triggered by higher than expected results in the first quarter, as well as an overall positive outlook for Romania’s economic development, based on a stabilized macro environment, cheaper financing and improved business sentiment that might attract investors, reads the bank’s statement. According to the report, a slowdown in industrial production growth in expected in the following quarters of 2014. However, the construction sector in expected to recover after it contracted in the first quarter of the year and also registered poor performances in 2013. Public investments and EU funds absorption are still below expectations and the desired level. It is expected, however, a significantly better performance of the investments in the rest of 2014, especially in the segment of infrastructure works. The forecasted improvement of the investments is also based on the projects financed with EU funds, especially those in the transportation segment, according to Garanti. For the exports’ dynamic, a slowdown is expected this year, while some acceleration is forecasted in the case of imports. However, these elements shouldn’t have a great impact on the current account deficit, which should stay at around 1.1 percent of GDP in 2014, being more than 100 percent covered by the foreign direct investments (FDI). Specialists of Garanti Bank are optimistic about the FDI level, which in the first four months of 2014 was EUR 785 million, up 9 percent year-on-year. The level expected for 2014 is of around EUR 3 billion, or 2 percent of the GDP. Garanti Bank also adjusted its end-year outlook of the EUR/RON rate of exchange to 4.45, from 4.55 as expected initially. The favorable financing conditions in local currency should remain the driver of the lending recovery for the next period, according to the bank Garanti Bank Romania is part of the financial-banking group Garanti Romania. Irina Popescu, irina.popescu@romania-insider.com