Romania Economic Forecast

Romania Economic Outlook

July 3, 2018

Economic activity slowed sharply in the first quarter but likely regained some speed in the second quarter. Soaring inflation and rising interest rates dragged heavily on private consumption in Q1, leading to a marked slowdown in GDP growth. However, strengthening retail sales and industrial production in April and the low unemployment rate in both April and May suggest activity accelerated in Q2. On the other hand, surging inflation and widening fiscal and current account deficits are clear signs of overheating. In early June, the IMF warned the government to tighten its fiscal policy and moderate wage increases to guarantee more sustainable and balanced growth. Meanwhile, the political scene remains tense. On 27 June, parliament rejected a no-confidence motion against the government. The motion was presented by the opposition after the powerful leader of the ruling Social Democratic Party, Liviu Dragnea, was sentenced to over three years in jail for abuse of office. Due to political volatility, the 10-year bonds yields reached an over four-year high in late June, and investor sentiment could be further hit going forward.

Romania Economic Growth

Growth is expected to moderate notably this year. Despite ongoing fiscal stimulus, faster inflation will weigh on household spending. Moreover, an inefficient absorption of EU funds will likely restrain fixed investment growth, which will nevertheless accelerate from last year. Large fiscal and current account deficits represent clear downside risks. FocusEconomics panelists expect growth of 4.2% for 2018, down 0.2 percentage points from last month’s forecast, and 3.6% in 2019.

Romania Economy Data

20132014201520162017
Population (million)20.020.019.919.819.6
GDP per capita (EUR)7,2207,5348,0758,6009,550
GDP (EUR bn)145150160170188
Economic Growth (GDP, annual variation in %)3.53.14.04.86.9
Consumption (annual variation in %)2.64.25.88.010.2
Investment (annual variation in %)-5.63.27.1-1.84.5
Industrial Production (annual variation in %)7.96.22.81.87.8
Retail Sales (annual variation in %)0.56.48.913.510.7
Unemployment Rate7.16.86.85.94.9
Fiscal Balance (% of GDP)-2.1-1.3-0.8-3.0-2.9
Public Debt (% of GDP)37.539.137.737.435.0
Money (annual variation in %)8.88.49.49.811.4
Inflation Rate (CPI, annual variation in %, eop)1.60.8-0.9-0.53.3
Inflation Rate (HICP, annual variation in %)3.21.4-0.4-1.11.1
Inflation (PPI, annual variation in %)-0.1-1.4-1.71.23.4
Policy Interest Rate (%)4.002.751.751.751.75
Stock Market (annual variation in %)26.19.1-1.11.29.4
Exchange Rate (vs EUR)4.484.484.524.544.66
Exchange Rate (vs EUR, aop)4.424.444.444.494.57
Current Account (% of GDP)-1.1-0.6-1.2-2.0-3.6
Current Account Balance (EUR bn)-1.5-1.0-2.0-3.6-6.3
Trade Balance (EUR billion)-6.0-6.0-8.0-9.0-12.0
Exports (EUR billion)44.047.049.052.057.0
Imports (EUR billion)50.053.057.061.069.0
Exports (annual variation in %)10.06.84.36.19.6
Imports (annual variation in %)2.06.07.57.013.1
International Reserves (EUR)32.532.232.234.233.5
External Debt (% of GDP)67.863.057.454.749.8

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Romania Facts

ValueChangeDate
Bond Yield5.010.23 %Jul 17
Exchange Rate3.97-0.34 %Jul 17
Stock Market8,005-0.59 %Jul 17

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