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EU Commission raises Romania's 2019 GDP growth forecast to 4.1%

EU Commission raises Romania's 2019 GDP growth forecast to 4.1% EU, Romania (Author: SeeNews). License: all rights reserved.

BUCHAREST (Romania), November 7 (SeeNews) - Romania’s economy is expected to expand by a real 4.1% in 2019, the European Commission said on Thursday, increasing its July forecast for gross domestic product (GDP) growth of 4.0%.

For 2020, the Commission predicts GDP growth of 3.6% in Romania, down from 3.7% projected in July, the EU's executive body said in its Autumn 2019 Economic Forecast report.

Private consumption is expected to ease but will remain the main growth driver throughout the forecast horizon, as disposable income continues to be supported by an expansionary fiscal policy and strong growth in real wages, the Commission said.

Also, investment is projected to remain relatively robust, supported by construction and an acceleration of EU-funded projects towards the end of the current programming period.

Risks to economic growth stem from both external and internal conditions, the Commission said. Externally, a potential slowdown in some of country’s main trading partners could negatively affect exports. Internally, a heavy election calendar throughout 2020 and recent political uncertainty could delay the restart of structural reforms and dampen efforts to reduce macroeconomic imbalances. Also, continued unpredictability of public policies could delay a sustained recovery of investment.

Romania's economy expanded by 4.1% in 2018, compared to a growth rate of 7% in 2017, according to provisional data from the country's statistical board.

The Commission warned that the general government deficit is set to increase to 3.6% of GDP in 2019, from 3.0% in 2018, driven by continued high increases to public sector wages.

Moreover, the general government deficit is forecast to reach 4.4% of GDP in 2020 and 6.1% of GDP in 2021, driven by significant increases to old-age pensions enacted in summer 2019. 

The structural deficit is projected to gradually increase over the forecast horizon as a result of the government’s expansionary fiscal policy, the Commission said.

The country's consolidated budget was in deficit equivalent to 2.6% of the projected 2019 gross domestic product (GDP) in the nine months through September, compared to a gap of 1.77% of GDP a year earlier, the latest finance ministry data shows.

On Wednesday, the European Bank for Reconstruction and Development (EBRD) said it has increased its projection for Romania's 2019 economic growth to 4.0% from 3.2% forecast in May. 

The Romanian finance ministry expects 5.5% economic growth for 2019.

(1 euro=4.7597 lei)