The European Commission, the executive arm of the European Union, said in its Winter 2017 economic forecast that Romania’s economy grew by 4.9 percent of GDP last year – a new post-crisis high – and that GDP expansion is set to slow down through to 2018, while the budget deficit will widen.
For this year, the EC estimates that the local economy will grow by 4.4 percent of GDP, while next year, the growth rate will further fall to 3.7 percent.
Meanwhile, the center-left government led by Sorin Grindeanu has based this year’s budget on a grow rate of 5.2 percent of GDP and a public deficit below 3 percent.
“In 2017, the general government headline deficit is projected to deteriorate further, to 3.6% of GDP,” according to the report, which mentions that the increasing deficit is marked by the fiscal easing.
The EC experts point out that the reduction of the BAT rate by one percentage point this year means that “Private consumption is expected to grow steadily in 2017, before it moderates slightly in 2018 as consumer prices pick up.”
On the labor market, the EC forecasts that the unemployment rate is set to fall by from 6 percent to 5.7 percent this year, while the unit labor costs are set to grow following the increase of the minimum wage and public sector wages.
“On the expenditure side, public wages were increased considerably while public investment is estimated to have dropped due to the slow implementation of large projects in the 2014-2020 programming period of EU funding,” said the EC about last year’s economic development.
The main conclusion of the report is that all EU Member States are expected to grow throughout the entire forecasting period (2016, 2017 and 2018).
The EC expects euro area GDP growth of 1.6 percent in 2017 and 1.8 percent in 2018. The overall growth estimate of the EU is 1.8 percent in the same period.