Although the pace of quarterly GDP growth in Romania slowed to just 0.1 percent in Q2 this year (from around 1 percent in each of the previous three quarters), annual growth continued at a robust pace, at 3.7 percent compared with 3.8 percent in Q1, macroeconomic data show.
Growth was driven predominantly by consumer spending, with investment also maintaining its recent strong growth, EY appreciates. Buoyant real income growth, underpinned by low inflation and a gradual fall in unemployment, will be supportive of consumption throughout 2015 and 2016. Tax cuts will give a further boost to disposable incomes.
“Overall, we now expect GDP to grow by 3.5 percent in 2015 (up from our forecast of 3.1 percent in June), followed by a pick-up to 3.7 percent in 2016 on strong domestic demand and less of a drag from net exports. The pace will then slow, but remain quite solid at an average of about 3 percent a year in 2017-2019,” according to the October 2015 issue of the EY Eurozone Forecast (EEF).
In his turn, Bogdan Ion (photo), Country Managing Partner EY Romania, explains that the internal consumption continues the upward trend outlined at the beginning of the year and remains the main growth driver in Romania for the end of the year as well, fueled by the low inflation level and by the recent fiscal relaxation.
“Unlike most countries in the Eurozone, Romania enjoys a low unemployment rate and steady economic growth. To fully exploit these advantages, we need strong efforts to grow the competitiveness of the Romanian economy, by reforming the labor market and improving the business environment”, Bogdan Ion said.
However, in the next few years unemployment will remain a major issue, EY forecasts. “We expect the jobless rate to fall steadily as the recovery becomes more established, but it will not fall below 10 percent until 2019. Businesses working in Europe should acclimatize themselves to this ‘new normal’ of slow but steady growth across the Eurozone,” the EEF notes.