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January 23, 2022
BUSINESS

Fiscal Council: Economic growth determined by absorption of European funds

The contraction of import indicates a poor performance of aggregated demand, bank credit stays in a negative territory and the acceleration of the quarterly trend of retail in Q1

The dynamic of the gross domestic product in the first quarter is difficult to interpret as the beginning of a sustainable recovery of economic growth while short-term indicators still send colliding signals, according to the Fiscal Council. ‘The contraction of import under conditions of genuine local currency appreciation actually indicates a poor performance of aggregated demand, bank credit stays in a negative territory and the acceleration of the quarterly trend of retail in Q1 happened under conditions of a monthly trajectory suggesting deceleration in the following quarter (negative propagation effect),’ states the opinion of the Fiscal Council on the Fiscal and Budgetary Strategy (SFB) for 2014-2016.  In addition, the evolution of the GDP exclusive of agriculture (a less volatile measure of economic activity performance) indicates a deceleration of economic activity in Q1 this year, the quarterly growth of this aggregate being the lowest in the last five quarters.
The structural shortcomings of the eurozone – Romania’s main trade partner – are still far from being dealt with and represent an important source of uncertainty throughout the scope of the forecast. The Fiscal Council warns that the growing trajectory of economic growth is determined on a medium and long term by both a better performance regarding the mobilisation of European funds (as reflected by the budgetary projection) and the continuation of the implementation of structural reforms in the economy. Among other things, the level of personnel expenditure in 2014-2016 seems to be under-evaluated,’ the Fiscal Council concludes its position on the 2014-2016 Fiscal and Budgetary Strategy.

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