UniCredit Bank: Romania’s GDP growth will slow down to 4.4%

Romania’s economic growth will slow down to 4.4% this year against decreasing public investments, weaker crops than in 2016, and a tighter fiscal policy beginning with the last quarter of this year, according to a UniCredit Bank analysis. The bank estimates an economic growth of 3.5% for 2018. “The fiscal policy remains the biggest threat to the economic growth and the macroeconomic stability. A larger current account deficit and an alert growth rhythm for salaries could push the EUR/RON exchange rate to higher levels, but inflation could stay in the parameters targeted by the Central Bank for 2017 – 2018,” according to the analysis. The alert, consumption-stimulated economic growth hides growing fiscal imbalances, similar to the fiscal indiscipline of the last decade, which brought about a strict austerity program, the analysis argues. “Despite a positive surprise in the first quarter of 2017, when the GDP grew by 5.7% compared to the similar period of the previous year, we anticipate a slowdown of economic growth because of the lack of infrastructure works, of reduced productive investment, of agriculture and of the negative fiscal impulse,” the UniCredit Bank analysts say. The monetary policy remains the biggest risk to the macroeconomic growth and stability, the analysis argues. The budget revenues expressed as GDP percentages are dropping because the reduction in the VAT rate is not compensated by an improvement in collection. The revenue gap will be covered this year by higher dividends at state-owned companies, keeping the budget deficit below 3% of the GDP. Still the budget deficit could exceed 3% of the GDP in 2018, according to the analysis. Raiffeisen revises up Romania economic growth forecast editor@romania-insider.com