IMF ups Romania’s GDP growth outlook, as global forecasts downgraded

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International Monetary Fund (IMF) is very optimistic regarding Romania’s perspectives of economic growth for this year. According to its latest World Economic Outlook, released on Tuesday, Romania will record a GDP growth of 4.2 percent in 2016.

Last autumn, IMF anticipated a 3.9 percent economic growth in 2016 and a negative inflation rate of minus 0.2 percent.

For 2017, Romania’s economy growth is forecasted to slow down to 3.6 percent, following the GDP to grow by 3.3 percent in 2021. The new estimates of IMF experts are in line with the latest projections of the European Commission  (4.2 percent in 2016; 3.7 percent in 2017) and the World Bank (4 percent in 2016 and 3.7 percent in 2017).

Both EC and WB warn that wage increases and tax cuts will have a significant negative effect on the budget deficit, which could exceed the 3 percent threshold of GDP.

Returning to IMF figures, regarding the consumer price evolution, the financial institution estimates that Romania will end 2016 with inflation of 1.5 percent.

The World Economic Outlook reveals also that the unemployment rate in Romania will drop from 6.8 percent in 2015 to 6.4 percent this year. It should further decease to 6.2 percent in 2017.

IMF has once again lowered its forecasts for the world economy. The report, subtitled “Too slow for too long”, predicts a global growth of 3.2 percent this year, down by 0.2 percentage point from its projection issued in January, and 3.5 percent in 2017, IMF Chief Economist, Maurice Obstfeld, describing the pace of growth as “increasingly disappointing”.

“Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation,” Obstfeld said. IMF warned on Tuesday of the risk of political isolationism, notably Britain’s possible exit from the European Union, and growing economic inequality as it cut its global growth forecast for the fourth time in a year.

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