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October 23, 2021
BUSINESS

EIU forecasts economic growth of 2.5 pc this year

After the Euro Area comes out of recession in 2014 the Romanian growth pace will gradually accelerate to an annual average rate of 4 pc from 2014 to 2017, the report shows.

The Romanian economy will register a growth of 2.5 per cent in 2013, a growth that reflects the Euro Area’s persistent recession, with the growth rhythm set to accelerate from 2014 to 2017 to an average annual rate of 4 per cent, the September report issued by the Economist Intelligence Unit (EIU) shows, ‘Bursa’ daily informs. The forecast included in EIU’s September report is slightly up compared to the July report which pointed out an economic growth of 2.4 per cent for 2013 and an average annual rate of below 4 per cent from 2014 to 2017.
Romania avoided a recession in 2012, registering a GDP growth of 0.7 per cent, and the economic recovery will be moderately consolidated in 2013. After the Euro Area comes out of recession in 2014 the growth rhythm will gradually accelerate to an average annual rate of 4 per cent from 2014 to 2017, given the fact that the GDP is backed by exports and by the rise in internal demand, the report adds. Nevertheless, according to the document, the Romanian government will face difficulties in lowering the budget deficit to the target of 2.1 per cent of GDP in 2013 unless it resorts to unpopular cuts in public expenses and unless it restructures state-owned companies, despite the more positive growth outlook for 2013.
The government’s macroeconomic program for the 2013-2016 period entails a continuation of fiscal consolidation and reforms meant to improve budget revenues, the management of public funds and the absorption of European funds. Reforms within state-owned companies, and within the health and education systems, will most probably run into political and social opposition, the report shows.
The Romanian government plans to lower the VAT from 24 per cent to 19 per cent and to lower the social insurance contributions for 2014, however these reductions will take place only when fiscal conditions allow it. In what concerns the monetary policy, the National Bank of Romania (BNR) is shifting attention from controlling inflation, the latter being in a constant downward trend, towards encouraging economic recovery.
Nevertheless, Romania will postpone the adoption of the Euro until 2016 or 2017 at the earliest or maybe indefinitely.
The improvement in the absorption of EU funds will contribute to investments in infrastructure, which could lead to a growth in the exports’ potential over a longer term. We remind our readers that Romania obtained EUR 22 bln in structural funds from the EU budget for the next budget period, 2014-2020, compared to the EUR 20 bn it obtained for the current budget period (2007-2013). Romania will receive funds for agriculture worth EUR 17.5 bln in 2014-2020 from the Common Agricultural Policy, representing a substantial growth from EUR 13.8 bln in 2007-2013. Romania absorbed only 12 per cent of the total structural funds put at its disposal in 2007-2013, but it is very likely that the absorption rate will improve in the following years.

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