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EBRD revises up 2018 economic forecasts, Growth in Romania to reach 4.2pc

The European Bank for Reconstruction and Development (EBRD) has revised up economic forecasts for 2018 as a broad-based recovery continues across its regions, bolstered by stronger investment activity and higher exports.

After suffering acutely during the global financial crisis, countries where the EBRD invests initially struggled to get back on a path to growth. But recovery took hold in earnest during 2017, ebrd.com informs.

In south-eastern Europe, growth momentum is also expected to ease but remain strong overall, with average growth declining from 4.1 per cent in 2017 to 3.6 per cent in 2018 and 3.5 per cent in 2019.

Growth in Romania is expected to gradually moderate from close to 7 per cent in 2017, when it was boosted by expansionary fiscal policy and rising wages. A return is now seen to more sustainable levels of 4.6 per cent in 2018 and 4.2 per cent in 2019, the EBRD report reads.

With expansion now seen in every one of the EBRD’s economies this year and next, the Bank’s new Regional Economic Prospects report is predicting average growth of 3.3 per cent in 2018, an upward revision of 0.3 percentage points from the forecast last November. It expects growth of 3.2 per cent for 2019.

The report said economic momentum remained strong but that growth might now have peaked. The 2018 and 2019 predictions represent a slowdown from 3.8 per cent in 2017, reflecting lower rates of productivity growth in advanced and emerging economies compared with levels seen before the 2008-09 crisis, as well as adverse demographic trends.

The EBRD’s Chief Economist, Sergei Guriev, said the lower productivity growth reflected the fact that most EBRD economies had exhausted the growth levers that had delivered rapid expansion until the onset of the crisis.

“In order to develop new sources of growth, these countries need to carry out structural reforms of product, capital and labour markets. They need to improve governance, promote integration into the global economy, and invest in human capital and sustainable infrastructure,” Guriev said.

“The good news is that the current recovery provides a solid window of opportunity for such reforms,” he added.

 

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