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BRD: Romanian GDP to grow by 4.1 pc in 2017, budget deficit – up to 3.4 pc of GDP

BRD-Groupe Societe Generale analysts forecast that Romania’s economy will slow down this year and will record a lead of 4.1 percent, while the budget deficit will exceed the ceiling imposed by the European Treaties and will reach 3.4 percent of GDP, according to the European standard ESA 2010, the Spring research report on country’s economic outlook reveals, hotnews.ro informs.

BRD estimate is close to that of the International Monetary Fund (IMF) on Tuesday, according to which Romania’s economic growth for 2017 was revised upward from 3.9 percent to 4.2 percent.

For the coming years, BRD analysts estimate economic growth rates of 3.8 percent in 2018 and 3.6 percent in 2019.

“Private consumption looks set to remain the backbone of economic growth, propelled by a new round of fiscal stimulus and wage hikes. Yet, it is least likely to repeat the strong performance from 2016, judging by the moderating growth pace in retail sales, the smaller magnitude of the fiscal  stimulus  implemented  this  year  as  compared  to  2016,  the  projected  increase  in  inflation  and slower growth in employment,” the report signed by Florian Libocor, BRD Chief Economist and Head of Research, reads.

As regards the budget deficit, BRD estimates an advance to 3.4 percent of GDP in 2017, but a a subsequent reduction to 2.9 percent of GDP in 2018 and 2.4 percent of GDP in 2019.

The RON/EUR exchange rate is expected to remain stable during 2017-2019 period.

“We see risks stemming from both external and domestic developments, being more pronounced in the case of latter ones. Overall, we see limited appreciation potential for RON against the EUR and expect it to stand at 4.52, end-2017 and 4.50, end-2018,” the document shows.

The government estimates a GDP growth rate of 5.2 percent this year and 5.5 percent for the next year.

On the other hand, curbing investment growth, could act ongoing uncertainties related to external and domestic developments and the shortage of skilled labor force, which might  be increasingly making itself felt.

“Exports may benefit from the improving global demand outlook, but rising labor costs denting into Romania’s external competitiveness can act as a counterweight. As such,  exports’ growth pace will most likely continue to be outpaced by imports one, taking  into account the traditionally high import intensity of domestic demand,” BRD report points out.

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