WB estimates Romania’s GDP to grow by almost 3 pc in 2015

Romanian economy will grow by 2.9 percent this year, after an advance of 2.6 percent in 2014, says the World Bank Group’s Global Economic Prospects (GEP) report, released on Wednesday. In last year’s October, the institution has forecasted a 2.7 percent advance for Romania’s economy in 2014.

The slowdown of domestic economy from 3.5 percent in 2013 to 2.6 percent in 2014 will be followed, according to WB report, by an acceleration of growth to 2.9 percent this year, followed by an advance of 3.2 percent in 2016 and one of 3.9 percent in 2017.

After a sharp deceleration in 2014, growth in the region is projected to recover moderately, with growth in developing countries in the region averaging 3.5 percent in 2015–2017, but with considerable divergence across countries. The tensions between Russia and Ukraine and the associated economic sanctions, the possibility of prolonged stagnation in the Euro Area, and sustained commodity price declines remain key downside risks for the region. Long-term growth is held back by structural impediments, including weak business environments and institutions and fragile banking systems.

„In several countries, banking systems remain saddled with an overhang of nonperforming loans. Fourteen of the twenty developing countries with the highest share of nonperforming loans are in Europe and Central Asia, led by Kazakhstan, Serbia, Albania, Bulgaria, Romania, and Ukraine. Even though these loans appear to be well provisioned and backed by adequate bank capital, they weigh on new lending for efficient investment and job creating growth, and pose a contingent liability for the public sector,” WB notes.

According to the financial institution, many CEE countries are in or near deflation, because of negative output gaps, significant cuts in regulated energy prices (in Bulgaria, Croatia, Czech Republic, Hungary, and FYR Macedonia), and declining food and fuel prices. Falling food prices reflected bumper harvests (especially in Bulgaria and Romania), as well as weaker demand because of the Russian ban on food imports.