Fiscal Council: Significant deceleration of economic growth, very small chances of growth exceeding 5pct

Romania’s Q3 2016 4.4-pct economic growth y-o-y is below what analysts were expecting, yet easy to anticipate given that economic boosting was based on fiscal measures that increased consumption, with a short-term effect; given all this, a GDP increase in excess of 5 percent is quite unlikely, Chairman of the Fiscal Council Ionut Dumitru said Tuesday.

“We are witnessing quite a significant economic growth deceleration. In Q4 2015 there was a strong increase in investment as the year closed, and probably this year the base effect will be significant as well,” said Dumitru.

He added that the deceleration as to be expected, “given that the tax incentive, mainly in consumption taxation, namely the cut in the Value-Added Tax (VAT) that was the main engine for the strong growth in consumption. As theory goes, stimulating consumption by fiscal measures cannot be a long-term booster; it is short-term economic growth, not necessarily a medium- or long-term one,” added Dumitru.

According to him, the current account deficit, up almost 2.5 times in the first nine months of 2016 from the same period of 2015, was fuelled by domestic demand as well.

Romania’s Gross Domestic Product (GDP) advanced 4.9 percent, January through September 2016, or 4.8 percent when seasonally adjusted, y-o-y, while Q3 2016 GDP was 0.6 percent higher on a quarterly basis, according to data released on Tuesday by the National Statistics Institute (INS).

Compared with the same quarter of 2015, the GDP was up 4.4 percent, or 4.6 percent when seasonally adjusted.

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