Local bank sees Romania’s economy up by over 5% in the next two years

Romania’s economy will grow by 5.1% in 2016 and 5.2% in 2017, after a 4% increase this year, according to a forecast made by local Banca Transilvania’s analysts. The estimates are more optimist that those recently presented by international institutions, such as the IMF, EBRD, and European Commission. Romania has entered a new economic cycle, after its gross domestic product (GDP) returned to the 2008 level in 2014, and the annual growth rate is expected to accelerate in the following years, according to Andrei Radulescu, senior economist of Banca Transilvania. Romania's GDP is expected to go up from EUR 150 billion in 2014 to EUR 177.5 billion in 2017. The private consumption will remain the main economic growth engine, with an estimated growth of 5.3% in 2016 and 5.5% in 2017, but productive investments are also expected to accelerate, reaching an annual pace of 9.3% in 2016 and 11.3% in 2017, according to Banca Transilvania’s estimates. The exports will continue to be outpaced by imports, which will also determine a widening of the current account deficit, from -0.7% of the GDP in 2015 to 2.8% of the GDP in 2017. However, Romania’s public debt should decrease from 39.2% of the GDP at the end of this year, to 36.1% of the GDP by end-2017, provided that the Government keeps the budget deficit under the levels established in the MTO (medium term objectives). This base macroeconomic scenario that Banca Transilvania’s analysts presented is, however, subject to risks and challenges coming from the state’s fiscal and budgetary decisions. The fiscal relaxation measures included in the new Fiscal Code and the recent decisions related to salaries in the public sector will have a significant impact on consumption and investments, as well as macroeconomic balance, according to Banca Transilvania. The EC and EBRD significantly improve forecasts on Romania’s economic growth IMF ups Romania’s economic growth forecast, as global perspectives get weaker editor@romania-insider.com