The European Commission has revised the estimations regarding the Romanian economy increase by a percentage point, to 5.2 percent, the increase slowing down to 3.9 percent in 2017 and it will reach 3.6 percent in 2018, according to the autumn economic forecast published on Wednesday.
The estimations were revised compared with the spring forecasts, when the executive estimated that Romanian economy will register an increase of 4.2 percent in 2016 and 3.7 percent in 2017.
„The real growth of GDP is currently one of the highest in EU and is estimated to be massive in the following years, supported by the fiscal easing and the increase in salaries. The inflation is expected to grow as the effects of the previous taxes reductions will disappear. The Government deficit is estimated to grow considerably because of the tax cuts and the increase in salaries in the public sector,” says the EC report.
Regarding the public deficit, the EC expects the pro-cyclical policies to bring a significant increase of this indicator because of the tax reductions and the increase of expenses. According to the new estimations, the public deficit might increase in 2016 up to 2.8 percent from the GDP, from 0.8 percent of the GDP in 2015, continuing to decrease up to 3.2 percent of the GDP in 2017 and remain at this level also in 2018, considering that the policies won’t be modified.
„This forecast doesn’t take into account the new legislative initiatives that are currently analyzed in the Parliament. These include a significant growth of pensions, a reduction of 5 percent of the social contributions and an elimination of approximately 100 taxes. These initiatives represent the main risk for the fiscal forecast,” says the European Commission.
According to the EC forecasts, the Romanian current account deficit will double this year, reaching 2.2 percent of the GDP, from 1.1 percent from the GDP in 2015. The current account deficit will continue to grow in the next two years to 2.6 percent from the GDP in 2017 and 2.8 percent from GDP in 2018.
Regarding the inflation, EC estimates that it will reach -1 percent in 2016 compared with -0.4 percent which it was estimated in the spring. For 2017 it was revised significantly in increase up to 1.8 percent to -0.6 percent in the spring.