Garanti Bank: lower GDP, increased consumption and imports

Romania′s GDP growth in 2014 is expected to decelerate to 2.6 per cent from the 3.5 per cent registered last year, mainly due to a lower production in agriculture and the deceleration of export growth due to a negative base effect

2014-06-07 22:20:17 - From the Print Edition

Meanwhile, some acceleration in imports is expected, as domestic consumption and investments start their recovery, according to the latest Quarterly Macroeconomic Report by Garanti Bank, corresponding to Q1 2014. Currently, there are several sectors that bring positive signs for the country's economic evolution. The construction segment is expected to recover, benefiting from the support provided by the increased absorption of EU funds for infrastructure. The trade segment should also bring a slight positive contribution in 2014, according to the same report. Moreover, consumption shows the first signs of improvement, as purchasing power is increasing through lower inflation and cheaper financing in local currency.
"Even though the inflation's annual rate reached a historical minimum of 1.1 per cent in February 2014, it is expected to increase in the second part of the year towards 3.5 – 3.8 per cent," stated Rozalia Pal, Chief Economist at Garanti Bank. "The major price increase in 2014 is due to the excise duty indexation by 4.77 per cent as of January 2014 and the additional excise duty hike on fuels as of April 2014 (with an around 18 per cent increase of excises, which results in a 5.5 per cent increase in the final price of fuels). Some further upward inflationary risk comes from the food price evolution in H2 2014 (strongly related to the harvest) and the potential increase in the prices of electrical energy related to disputes over the green energy support program.