ECONOMY FINANCE&BANKING

EBRD improves Romania’s economic growth forecast in 2017

The Romanian economy is expected to register a 4 pct advance this year, the European Bank for Reconstruction and Development estimated on Wednesday.

In November 2016, the EBRD was forecasting a 3.7 pct expansion.

It is the highest growth level among the European states in which the EBRD operates.

Next year, Romania’s GDP growth will slow down to 3.5 pct, predicts the international financial institution.

“After a 3.9 pct advance in 2015, Romania’s economy grew by 4.8 pct in 2016, supported by the strong domestic demand. The main driver of the economic growth during this period was the private consumption, amid more disposable income (supported by VAT and wage increases), improved labour market and low inflation. Consumption will continue to stimulate growth in 2017 and 2018, backed by a rise in the minimum income and wages in the public sector, which are part of the electoral promises of the ruling political party – the Social Democratic Party (PSD),” the EBRD said.

According to the source, as a result of wage increases, government spending will probably remain at a high level in 2017, with the risk of exceeding the 3 pct of the GDP deficit threshold, the international financial institution warns.

Private investment will be supported by the cancellation of the construction tax and the low cost of funding.

On the other hand, the better growth prospects of Romania’s economic partners will lead to a slight improvement in net exports, although domestic consumption will offset some of these developments, the EBRD said.

In the spring forecast, released in April, the National Prognosis Commission (CNP) has kept its economic growth estimate for this year at 5.2 pct.

For its part, the International Monetary Fund (IMF) has revised upwards, from 3.8 pct to 4.2 pct, the estimates for the Romanian economy’s evolution this year, according to the latest “World Economic Outlook” report, recently released by the international financial institution.

The Romanian Finance Minister, Viorel Stefan was explaining, on April 12, that Romania could record in 2017 a higher-than-estimated economic growth, of 5.2 pct of the GDP, an important contribution to this being agriculture.

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