Romania Economic Forecast

Romania Economic Outlook

October 3, 2017

Romania drew attention in H1 as the fastest-growing country in the region, defying expectations. However, political wrangling has recently dominated headlines as the government attempts to lay out fiscal policies for public sector wage hikes, tax cuts and increased infrastructure spending. Contentious discussions over 2018 tax cuts are creating the impression of unpredictability in the political arena, which could push away investors. Business sentiment has worsened, and analysts were more pessimistic about current economic and business conditions in August. Furthermore, without significant amendments, the government’s ambitious spending plans could put it over the European Commission’s established 3% of GDP deficit ceiling, which could result in an excessive deficit procedure and hurt Romania’s markets and credit ratings. Chaotic policy making could put the economy at risk of overheating if economic growth is unsustainable.

Romania Economy Data

20122013201420152016
Population (million)20.120.019.919.919.8
GDP per capita (EUR)6,6347,2207,5368,0598,591
GDP (EUR bn)133145150160170
Economic Growth (GDP, annual variation in %)0.63.53.13.94.8
Consumption (annual variation in %)0.82.64.25.87.5
Investment (annual variation in %)0.6-6.83.87.2-2.2
Industrial Production (annual variation in %)2.47.96.22.81.8
Retail Sales (annual variation in %)4.10.56.48.913.5
Unemployment Rate6.97.16.86.85.9
Fiscal Balance (% of GDP)-3.7-2.1-1.4-0.8-3.0
Public Debt (% of GDP)37.337.839.438.037.6
Money (annual variation in %)4.68.88.49.49.8
Inflation Rate (CPI, annual variation in %, eop)5.01.60.8-0.9-0.5
Inflation Rate (HICP, annual variation in %)3.43.21.4-0.41.1
Inflation (PPI, annual variation in %)4.8-0.1-1.4-1.70.9
Policy Interest Rate (%)5.254.002.751.751.75
Stock Market (annual variation in %)-13.812.116.46.4-14.3
Exchange Rate (vs EUR)4.434.484.484.524.54
Exchange Rate (vs EUR, aop)4.464.424.444.444.49
Current Account (% of GDP)-5.0-1.1-0.6-1.2-2.2
Current Account Balance (EUR bn)-6.4-1.5-1.0-2.0-4.0
Trade Balance (EUR billion)-9.0-6.0-7.0-8.0-9.0
Exports (EUR billion)40.044.047.049.052.0
Imports (EUR billion)49.050.053.057.061.0
Exports (annual variation in %)0.010.06.84.36.1
Imports (annual variation in %)0.02.06.07.57.0
International Reserves (EUR)31.232.532.232.234.2
External Debt (% of GDP)74.867.863.056.554.4

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Romania Facts

ValueChangeDate
Bond Yield4.350.0 %Oct 16
Exchange Rate3.890.22 %Oct 16
Stock Market8,032-0.03 %Oct 16

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Romania Economic Growth

October 3, 2017

The economy is expected to slow slightly in H2, but will continue to be supported by strong domestic demand. Higher wages could dent Romania’s competitive edge in labor costs as wages rise above neighboring countries’ and if they are not matched with gains in productivity. Furthermore, investment has remained stagnant and is much needed to revive aging infrastructure. Our panelists predict an expansion of 5.2% in 2017, with growth of 3.8% penciled in for 2018, which is unchanged from last month’s forecast.

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