Revised growth targets in Romania may signal a brighter economic future
Some analysts are excited about the growth in the Balkan country of Romania, a nation that, along with its neighbors, has often struggled to modernize and put aside some of the negative impact of past centuries.
Now, World Bank forecasts for Romania are exceeding expectations.
“World Bank recently increased Romania’s GDP forecast by 0.7 percent to 4.3 percent in 2017,” Binay Sarda, an investment research assistant manager at Aranca, told Balkan Business Wire, adding that new projections of 3.7 percent for 2018 and 3.5 percent in 2019 have also been set.
Sarda works with a leading buy-side firm in the Middle East and has over seven years of experience. He has assisted and overseen a number of projects related to macro-economic and thematic research across geographies.
Sarda said Romania’s GDP increased by 5.7 percent in the first quarter, the highest hike in the European Union. This, he said, was led by an increase in household consumption, which contributed about 4.8 percent to the GDP increase.
“We believe consumption will continue to be the primary engine of GDP growth in the coming years, backed by a rise in the minimum income and wages in the public sector,” Sarda said, also citing increases in public pensions and tax cuts.
Further, Sarda said, the government has started taking steps in the right direction toward growth.
“Various reforms are expected to transfer the consumption-led economic growth to production-led growth by supporting private investment, through cancellation of the construction tax and low cost of funding,” Sarda said. “However, we feel that fiscal relaxation is likely to put pressure on the budget deficit, and may exceed the target of 3 percent of GDP set by the government. This could result in increased costs of government borrowings and lead to currency devaluation.”
Sarda also said the government might adopt cost-cutting measures if targets are not met, and these could be a “dampener” for future economic growth of the country.
“Going by the government’s commitment to rein in a budget deficit and simultaneously fuel economic growth, we expect it to maintain a prudent balance between fiscal austerity and structural reforms and send a positive signal to the global investor community,” Sarda said.
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