The National Bank of Romania (BNR) forecasts for 2017 an economic growth ranging between 4 pct and 5 pct, but this is in connection with the institution’s macro-economic scenario, the central bank’s governor Mugur Isarescu on Thursday told a news conference.
“The prediction in our model is confidential (…) it’s somewhere between 4 pct and 5 pct. It’s unrelated to the budget construction, do not put them in counterpart, we wouldn’t want to create another issue in the society! It is a prediction linked to our macro-economic model. (…) We too have been off the mark with the inflation prognosis for one year and a half, meaning that the inflation was way smaller. I don’t think a lot of analysts would trust our prognoses if we were mistaken. This is how prognoses go. We work in a market economy, with several factors to deal with,” said Isarescu.
The draft budget’s construction for 2017 is grounded on an economic growth of 5.2 pct, a budget deficit (in cash) estimated at 2.96 pct of the GDP, and an average annual inflation of 1.4 pct, according to the Report on the macro-economic situation for 2017 and its projection for 2018 – 2020, published on the Public Finance Ministry’s website.
The National Prognosis Commission(CNP) has revised upwards its economic growth prognosis until 2020, these indicators underpinning the budget’s construction for 2017. Thus, the increase estimate for 2017 was revised from 4.3 pct in the Autumn Prognosis to 5.2 pct in the current one.
In its turn, the World Bank has predicted in the Report on Global Economy Perspectives, that Romania’s economy will shoot up by 3.7 pct in 2017.
Likewise, the figures included in IMF’s latest Regional Economic Issues (REI) report for Central, Eastern and Southeastern Europe published on 2 November 2016 are similar to those of the World Economic Outlook (October). The IMF counts in 2017 on an advance of Romania’s GDP of 3.8 pct, the highest economic growth rate in Europe.
The estimate of the European Bank for Reconstruction and Development (EBRD) too indicates for the Romanian economy a growth rate of 3.7 pct for 2017, with Romania expected to record the highest economic growth rate in Europe, according to the Report on Global Economy Outlook published at the beginning of November 2016.
In addition, the European Commission predicts for 2017 a 3.9 pct advance, according to fall economic forecasts released at the beginning of November.
National Bank revises downwards 2017 year-end inflation forecast
The National Bank of Romania (BNR) has revised downwards by 0.4 percentage points its inflation forecast for end-2017, which is now projected at 1.7 percent, BNR governor Mugur Isarescu told the press conference on Thursday, on the occasion of the presentation of the central bank’s Quarterly Inflation Report.
BNR estimates a 3.4 pct inflation rate for the end of next year, 0.2 percentage points above the previous forecast; the target is 2.5 percent +/- 1 percentage point.
According to the governor, the annual inflation rate was relatively stable in Q4 2016.
“Raw material quotations reinforce their upward trend which is still continuing, yet seemingly not at such a fast rate,” Isarescu said, adding that fuel prices have returned to the positive territory.
The central bank head said that although demand for loans in domestic currency remained robust, a slowdown is noticeable, apparently in correlation with “the uneven unfolding of the First Home program.”
“Romanian producers gradually losing domestic market share”
Romanian producers are gradually losing domestic market share because prices erode their competitiveness, governor of the National Bank of Romania also told the press conference on Thursday.
“I think we are having issues not necessarily with the increase of the relative importance of imports as an effect of the adjustment of consumer demand, but particularly with a clear trend of erosion of the domestic producers’ price competitiveness. From this point of view we calculated the real effective exchange rate which points to a loss of competitiveness. The Romanian producers gradually lose the domestic market. We never make cost forecasts but (…) there is little room for an appreciation of the domestic currency. There is hardly such room, not to say there is none at all,” Isarescu said.
According to him, domestic investments are relatively modest.
“Investments stay relatively modest. For nearly 20 months now we have had a robust economic growth, but based mainly on consumption, with a fresh revival of loans to non-financial companies. The BNR has shown on various occasions that the big problem is decapitalisation, or the low capital indicators of Romanian companies. This is where we face issues. The multinationals usually get financing from the parent company or from their home market. The issue is not that the interest rates are too high or too low,” said the central bank head, pointing out that retail banks have a hard time finding bankable clients.