EBRD revises downwards Romania’s economic growth forecast to 3.2%

One day after the release, by the European Commission, of the economic growth forecast for Romania, revising it downwards to 3.3% of GDP, down from the forecast in January (3.8%), the European Bank for Reconstruction and Development (EBRD) has announced on Wednesday the decrease of its forecast for Romania’s economic growth in 2019 to 3.2%, down from the level of 3.6% anticipated in November.

The decision is due to the increased investment risk, a tighter monetary policy and to increased external imbalances, the EBRD said in its May 2019 Regional Economic Prospects report.

EBRD anticipates 3.2% growth in 2020 as well.

EBRD warned that investor sentiment has been damaged, with an expected negative impact on overall economic activity due to fiscal changes announced by the Romanian government in December 2018.

Macroeconomic imbalances have widened, with the current account deficit rising to 4.6% of GDP in 2018, up from 3.2% in 2017 and the budget deficit reaching 3% of GDP due to looser fiscal policies.

Inflation has also been a concern, reaching a five-year high of 5.4% in June 2018, well above the Romanian central bank’s upper target of 2.5 % +/- 1 percentage point, before receding to 3.3% by end-year. Romania’s annual consumer price inflation accelerated to 4% in March, from 3.8% in the previous month.

EBRD sees as positive the general government debt being still low by regional standards, at around 37% of GDP.

Romania’s economy grew by 4.1% year-on-year in 2018, as compared to a growth rate of 7% in 2017, provisional data from the country’s statistical board showed in April.

The National Commission for Strategy and Prognosis (CNSP) has maintained on Tuesday the economic growth forecast at 5.5%, however the nominal value of the GDP has been revised upwards to RON 1,031 billion, up against RON 1,022 billion in the Winter Prognosis. The growths for the following years have also remained unchanged: 4.7% in 2020 and 5% in 2021 and 2022.