The National Forecast Commission has upgraded the GDP growth forecast for Romania to 6.1%
Just like most European Union Member States, Romania has reported a significant economic growth for 2017 and is anticipating similar results for 2018. Our country has all the more reason to feel proud, as there is a wide percentage gap separating it from the other Member States. Take France, for instance, whose GDP last year hit its highest level in the last six years, standing at merely 1.9%. Romania on the other hand had a 6% growth rate, which made France Press news agency label it as Europe's "tiger".
On Sunday, the National Forecast Commission made public its predictions for 2018, upgrading to 6.1% its GDP growth forecast. At the same time the Commission maintained its forecast for 2019 and 2020 at 5.7% and at 5% for 2021. Although positive, the forecasts of Romania's external partners are less optimistic. The European Commission expects Romania's economic growth to stand at 4.4% in 2018, which mirrors the latest forecast of the International Monetary Fund. The World Bank estimates a 4.5% GDP growth rate, whereas the European Bank for Reconstruction and Development estimates a growth rate of 4.2%.
Yet what makes Romanian economy so competitive? What is the secret behind this success, in a country facing severe labour shortage, rising migration and waning demographics? While the repeated Governments of the ruling coalition in Romania, made up of the Social-Democratic Party and the Alliance of Liberals and Democrats, have taken credit for Romania's bolstering growth in 2017, Romanian citizens themselves are more likely to have contributed to this phenomenon, by increasing consumption.
Both economic pundits and Central Bank experts agree that Romania's growth rate is likely to slow down in 2018, evidence of which can be found in the latest forecasts by international financial institutions. It's unlikely, experts argue, that the authorities will be able to uphold the current growth parameters, given that this was the effect of salary increases. In a recent report, a commercial bank in Romania points out that the recent fiscal uncertainty and populist measures have kept investments away.
Moreover, should the Government resort to additional tax increases and cuts in public spending so as to observe the 3% budget deficit target, this might further slow down economic growth. As for the industrial output, it is expected to go up due to the rising demand on European markets. Still, imports are expected to rise faster than exports, as they cover a large part of the domestic demand. Therefore the coming years might prove relatively difficult for the Romanian economy, and the "tiger" might turn out to be yet another bubble.
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