Unicredit estimates economic slowdown in Romania

The economic growth rate in Romania will slow down to 4.4 per cent in 2018, from close to 7 per cent last year, and the government risks to register budget deficits exceeding 3 per cent of GDP in 2018 and 2019, due to further populist spending, Unicredit economists estimate in CEE Quarterly Report.

2018-04-13 09:45:40

"Economic growth is expected to slow to 4.4 per cent in 2018 and 3.6 per cent in 2019, with consumption and investment affected by slower wage growth, fiscal uncertainty and rising borrowing costs," said Dan Bucsa, Chief CEE economist at UniCredit Bank. "Romania is facing two clashes with the EU on judicial and fiscal issues. The risk of a return to the Excessive Deficit Procedure (EDP) in 2019 remains high."

The economists forecast two potential clashes with European institutions in the second quarter of 2018, one on judicial and one on fiscal issues.

The bank's economists see rising risks of political clashes in Romania with impact on the economy.
The report reminds that a draft of controversial laws passed by parliament at the end of 2017 eroded the government's popularity at home and cost PSD the support of the socialist group in the European Parliament.

According to the economists, the second potential clash between Romania's government and EU refers to loosen fiscal policy and the risk of budget deficits exceeding 3% of GDP in 2018-19.
Last year, the budget deficit was close to 3 percent of GDP (2.83 percent on cash), after 3 percent of GDP in 2016, and Romania risks to return to the excessive deficit procedure.