Banca Transilvania keeps Romania’s 2017 GDP growth fcast at 4.3%

btBanca Transilvania said that Romania’s economy will expand by 4.3% in 2017, confirming a previous forecast made in July, as the country’s main challenge this year will be to hang on to reforms, according to

Banca Transilvania projects that Romania’s economic growth will slow down to 3.9% in 2018, it said in its macroeconomic scenario February report.

Romania’s economy expanded by 4.8% in 2016, compared to a revised 3.9% growth in the previous year, flash data from the country’s statistical board, INS, showed.

Romania’s budget bill, approved by the parliament earlier this month and endorsed by president Klaus Iohannis despite his reservations is built on projections of 5.2% economic growth and deficit equivalent to 2.99% of gross domestic product (GDP).

Banca Transilvania said in its report that it does not expect the budget deficit to surpass 3% of GDP this year, while for 2018 and 2019, it forecasts a 2.5%/GDP deficit.

The main economic challenges facing Romania in 2017 are to consolidate its macro-financial stability, to keep a balanced mix of economic policies, to accelerate structural reforms and to strengthen governance in the public sector, the bank said. Also, Romania needs to invest in transport infrastructure, in education, research, health, in its capital market development and in agricultural development.

With no permanent reforms, Romania risks the deterioration of its international competitiveness and the outflow of financial and human capital, the report showed.

The bank sees Romania’s 2017 inflation at 1.8%, while for 2018 the bank expects consumer prices to rise 2.7%.

Romania swung to annual inflation of 0.1% in January following 0.5% deflation in December. In its latest inflation report issued in February, Romania’s central bank, BNR, lowered its 2017 inflation forecast to 1.7% from previously projected 2.1%.

In terms of monetary policy, Banca Transilvania expects BNR to raise its key rate to 2.5% this year and to 3.50% in 2018.

At its last monetary policy meeting on February 7, BNR held its key rate unchanged at record low 1.75%. BNR last changed its monetary policy rate in May 2015, cutting it by 25 basis points to 1.75%.

The analysts also said they expect an average exchange rate of 4.46 lei per euro in 2017 and of 4.32 lei per euro in 2018.




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