Romania economy to grow by 3.7 percent, says Garanti

Garanti Bank estimates that it will have a growth of 3.7 percent in GDP this year due to buoyant consumption, according to the latest quarterly macroeconomic report corresponding to the first quarter of 2016, says a press release from the bank.

The bank foresees that the main drivers of the economy in 2016 will continue to be trade and IT&C, while the real estate sector’s contribution in GDP could further intensify. The residential market is just facing the start of a new cycle, whereas the rapidly growing service sector will increase demand for office spaces, according to the report.

The state budget revealed in the first two months of the year a budget surplus of RON 0.8 billion. The VAT cut on food products from 24 percent to 9 percent implemented in 2-15, he general VAT cut from 24 percent to 20 percent as of January 1st, as well as the 25 percent increase of wages in public healthcare, will continue to show their effects on the budget execution this year.

The budget deficit nonetheless will remain under 3 percent of GDP, according to the bank’s report. “2016 has started under good auspices. Trade is high, some service sectors, such as the IT and outsourcing, are booming and the real estate have started to show clear signs of rebound,” stated Ufuk Tandogan, CEO Garanti Bank Romania. “As such, we can only expect this year to follow the positive outlook and see the local economy continues its progress,” he added.

Garanti Bank expects prices to drop in the first half of the year, driven by the VAT cuts and further estimates are that the annual inflation will enter positive territory in the second half of the year, adds the press release. Furthermore, the bank foresees that the easing monetary conditions will be kept during the year by allowing lower inter-bank rates compared to the monetary policy rate. Moreover, Garanti Bank estimates the first increase in the key interest rate in 2017.

Regarding the minimum reserve requirements rate, the bank expects that it will be further cut this year, from the current 12 percent (for foreign currency liabilities) and 8 percent (for RON liabilities), to 9 and 6 percent, respectively.

Garanti Bank Romania is part of the financial-banking group Garanti Romania, which brings together Garanti Leasing (the brand under which the company Motoractive IFN SA operates) and Garanti Consumer Finance (the brand under which Ralfi IFN operates). Garanti Bank is held by Turkiye Garanti Bankasi AS (TGB).