Romania to see among highest growth in emerging Europe, says EBRD

Newsroom 14/05/2015 | 16:49

Romania will register this year one of the highest economic growth in emerging Europe – 3 percent – and 3.2 percent in 2016, amid stronger economic environment in the Eurozone, according to the latest Regional Economic Prospects report released Thursday by the European Bank for Reconstruction and Development (EBRD).

Credit recovery remains constrained by high non-performing loan (NPL) ratios. NPL levels have recently declined from very high levels markedly in Romania and Kazakhstan, following strong policy steps by the regulators.

According to EBRD, real GDP growth in Romania in 2014 was of 2.8 percent and although initially the forecast for 2015 was a 2.8 percent increase, EBRD forecast for the current year in terms of real GDP growth is now 3 percent, up 0.2 percent since January. For 2016, there is a 3.2 percent increase forecasted.

EBRD also shows in its latest Regional Economic Prospects report that Romania’s  economy  grew  by  2.8  per cent  in  2014,  on  the  back  of  strong private consumption, boosted by a rise in minimum wage in mid-2014, while contribution of net exports remained low and investments subdued. Recent and prospective  interest  rate  cuts,  enabled  by  inflation  falling  on  the  back  of energy and food prices, will continue to boost domestic demand in 2015 and 2016, also shows the bank’s report. Rising industrial confidence and the deprivation of inventories may lead to a rise in investments after two years of fall.  A  recent  reduction  in  NPLs following proactive provisioning policies  by the  central bank  –  a first in the region  –  should  help the credit supply. Government expenditure is expected to rise  in  order  to  absorb  more  EU  funds,  as  absorption  rate  still  remains  the lowest in EU. Overall, these should enable domestic demand to edge up.

Somewhat  stronger growth in  Eurozone, albeit still moderate, may push up Romania’s net exports in the near term, keeping growth at around 3 percent in  2015  and  3.2  percent  in  2016,  among  the  highest  in  emerging  Europe.

Meanwhile, annual average inflation is expected to remain at an average of 0.5 percent in 2015, on the back of June cuts in VAT on food products, as well as low inflation expectations and lower commodity prices.

Staff

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