EC forecasts 4% GDP growth in Romania in 2019, warns about inflation

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Following an annual growth of 4.1% in 2018, real GDP growth accelerated in the first quarter of 2019 to 5.1% year-on-year (1.3% quarter-on-quarter). Private  consumption  remained  the  main  driver,  increasing  7.0%  year-on-year  thanks  to  still  double-digit  wage  growth.  Investment  picked  up,  thanks  mainly  to  a  recovery  in construction,  spurred  by  recent  fiscal  stimulus.  Export growth, by contrast, weakened to 3.2% year-on-year, while import growth climbed to 9.3%, reads the European Commission’s Summer 2019 Economic Forecast on Romania released on Wednesday.

The  strong  growth  of  real  GDP  in  the  first  quarter  led  to  an  upward  revision  of  growth  for  the  whole  year. Annual real GDP growth is forecast to mildly ease to 4% in 2019 and 3.7% in 2020. However, the composition of  growth  is  expected  to  become  somewhat  more balanced  as  total  investment  strengthens  with  a  pick-up  in private investment.

Tight labour  market  conditions  are  expected  to  continue  over  the  forecast  horizon,  with  unemployment remaining close to its current, very low level. Wage growth is forecast to moderate to single digits in 2020, led by the expected slowdown in public wage growth.

In 2018, HICP inflation stood at 4.1%, the highest in the EU. Annual consumer price growth remained strong in the first quarter of 2019, at 3.8%, and is expected to exceed 4% in the second quarter, before decelerating again. Rising  unprocessed  and  processed  food  prices  explain  the  strong  upward  price  dynamics  boosted  by  a depreciation of the currency at the beginning of the year and strong consumption and wage growth. As a result, annual  headline  inflation  is  expected  to  average  4.2%  in  2019,  before  decelerating  to  3.7%  in  2020.  The deceleration in 2020 is expected to follow moderating wage pressures and softer domestic demand, the document concludes.

The European Commission publishes a full set of macroeconomic forecasts for the EU and its Member States in spring (May) and autumn (November) and publishes interim forecasts updating GDP and inflation figures in winter (February) and summer (July). These forecasts are produced by the Directorate-General for Economic and Financial Affairs (DG ECFIN).

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1 Comment
  1. Franklin says

    Romania is improving a lot in recent years. The only real problem we have is the ongoing extreme, unsustainable population growth in Africa: https://www.jamiiforums.com/threads/overpopulation-a-problem-or-not.1600058/

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