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January 24, 2022
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EBRD expects Romania to grow by 3.5 per cent in 2015

The European Bank for Reconstruction and Development (EBRD) forecasts that the Romanian economy will grow by 3.5 per cent in 2015 and 3.7 per cent in 2016, the Bank says in its latest Regional Economic Prospects report, published today.

Growth is expected to be further supported by stronger domestic demand. Consumption will be boosted by higher disposable income as a consequence of the recent VAT cut on food products from 24 per cent to 9 per cent, as well as by public wage hikes.

Private investments will continue to recover on the back of improved investor sentiments and previous decline in the cost of funding, while government investment is expected to rise in the second half of 2015 as the country absorbs more EU funds.

Average inflation is forecast to remain negative in 2015 on the back of recent and planned VAT cuts, low oil prices and low inflation expectations.

In general, the outlook for economies where the EBRD invests remains split, with countries further to the east weighed down by the Russian recession and weak oil and other commodity prices.

Regions further to the west are benefitting from a eurozone upturn and the impact of accommodating European Central Bank monetary policies.

According to the EBRD’s latest Regional Economic Prospects report, growth in the region as a whole is expected to slow to just 0.2 per cent this year, from 1.8 per cent in 2014. Moderate growth of 1.6 per cent is expected in 2016. These forecasts are unchanged from May, but they mask regional differences.

Transit countries in south eastern Europe which have provided medical and social care, food, water, and accommodation for refugees are facing logistical and fiscal challenges.

Broken down by region, the EBRD report sees a relatively strong outlook in central Europe and the Baltics, supported by Eurozone quantitative easing (QE) and lower commodity prices which are providing scope for easier monetary conditions in the region.

“The expected average growth rate of around 3 per cent in 2015 and 2016 provides for continued, albeit slow, convergence of income levels with those of advanced economies,” the report says.

Economies in south eastern Europe are also benefitting from QE in Europe, the weaker euro and lower oil prices. Growth is expected generally to pick up in 2015 and be maintained in 2016. Greece’s economy, however, is expected to contract both this year and next.

 

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