The World Bank has revised down the GDP growth forecast for this year to 3.7% in its latest Global Economic Prospects Report compared to 3.8% estimated in the ECA Economic Update Report. The growth projection for last year was slashed also to 4.7% from 5.1%, whereas the medium-term outlook remained unchanged. Nevertheless, the 2016 GDP increase estimation remains way above the 4.0% forecasted in the WB’s Global Economic Prospects Report from June last year. The growth cut in 2016 was most probably the result of weaker-than-expected performance of the consumption and investment in the last part of the year. Moreover, the consumption would most probably continue to slow in 2017, partially over the high base effects, so the WB sees Romania’s strong growth in 2016, boosted by procyclical VAT cut, stabilizing this year.
The economic growth accelerated in 2016 over strong domestic demand supported by low energy prices, faster investments growth, EU funds and labor market improvements, according to the report. The WB also notes that investment growth has recovered, while exports growth was less affected by the demand weakening in major market, as Romania benefited from Germany’s solid performance. Hence, the strong exports of goods and services to the euro area were additional supportive factors fuelling economic growth in Romania, the financial institutions said.