What are Romania’s main sources of downside risk? Oxford Economics knows…

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The main risks for the Romanian economy are the strong slowdown of China’s economy, which would delete two percentage points of the estimated growth of GDP, as well as the tightening of monetary policy by the US Federal Reserve (Fed), with a negative impact of one point, Oxford Economics shows in its recent forecast.

Romania’s GDP would grow by 3.8 percent this year, to slow gradually to 3.2 percent next year and 2.9 percent in 2018, while for 2019, GDP growth is forecast at 3.2 percent.

UK-based research house argues that the shock recorded by China is extending to other countries and global economic falls to just 1.7 percent next year. Thus, Romania’s economic advance slows down significantly compared to the baseline scenario, because of the lower exports demand.

Domestically, the economic risks are concentrated on the impact of fiscal easing on the sustainability of state’s finances in the medium term, but the political uncertainty is also a major problem, and political tensions will increase in the context of approaching elections, British analysts note. Moreover, Romania is still exposed to a possible Grexit from the euro zone, both by bank connections and the impact of Hellenic crisis in Europe.

A positive surprise for the economy could come in the fight against corruption, which has already led to reducing tax evasion and increasing state revenues. Effects of fighting corruption could reduce the impact of fiscal easing on state finance.

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