Romania’s economy, assessments and forecasts

The European Commission maintains Romanias estimated economic growth rate in 2018 at 4.5%

Roxana Vasile, 04.05.2018, 13:37

In the spring economic outlook made public on Thursday, the European Commission maintains Romania’s estimated growth rate at 4.5%, which it describes as “robust”, and forecasts the GDP will increase by 3.9% in 2019. This is a lucid analysis, coming from outside the country, says economic expert Constantin Rudniţchi, who explains:

“What we can notice in Romania’s case is that economic growth is further reported at a fast pace, but, a decrease is estimated, on the other hand, so attention should be paid to the issue. Whether we registered a 7% economic growth rate last year, the forecast for this year is 4.5% and the outlook for 2019 is 3.9%. Once more, these are good figures, but there is an overall downward trend, as lower figures are being reported.”

The European Commission also notes that Romania’s budget deficit will stand at 3.4% of the GDP in 2018 and will increase to 3.8% in 2019, mostly because of the pay rises in the public sector. Here is Constantin Rudniţchi again:

“The European Commission’s forecast shows that there are doubts on Romania’s maintaining its budget deficit at this level. I would like to mention here the fact that last year, too, experts believed Romania’s budget deficit would deepen, but in the end the line authorities, managed to keep it at 3% of the GDP. It is true, however, that public investments were cut, as figures show it clearly. I am afraid that this year, too, part of the public investment will be slashed in order to keep the budget deficit within the limits stipulated by the Maastricht Treaty, which means that the Romanian economy is currently channelling larger amounts of money for salaries and less for investments.”

As regards the inflation rate, the European Commission estimates that it will continue to follow an upward trend, although figures will no longer be that high in 2019. The favourite topic of discussions over the past few months, particularly during domestic political rows, the growing inflation rate has however some external causes behind it, which have nothing to do with the Government’s and the central bank’s actions. This is the opinion shared by the leader of the ruling Social Democratic Party, Liviu Dragnea, who on Thursday attended a meeting with Prime Minister Viorica Dăncilă and the governor of the National Bank of Romania, Mugur Isărescu. Liviu Dragnea:

“Both the Government and the National Bank have agreed that the inflation rate has gone up during this period of time due to external factors. We are referring to factors from outside the Government and the National Bank- and I can give you some examples: natural gas, energy, oil- which have a huge impact on the inflation rate and which can’t be managed by the Government or the National Bank.”

Liviu Dragnea has said that big infrastructure projects will be started in Romania in the second half of 2019.

(Translated by D. Vijeu)