Romania’s GDP growth projections unchanged by the World Bank

The World Bank maintained its GDP growth estimations for 2018, 2019 and 2020 in the latest Global Economic Prospects report the same as in the Europe and Central Asia Economic Update report In April. Figures were revised up from the January Global Economic Prospects, in which a more significant downwards revision was made due to the bank tax bill. Even if the bill was adjusted at end-March, it still preserved some negative effects, which are reflected in the rather significantly lower GDP growth forecasts for 2019 and 2020, compared to last year.

Thus, the financial institution sees economic growth in Romania to moderate to 3.6% y/y in 2019 from 4.1% y/y in 2018. The WB noted that activity slowed toward the end of 2018, reflecting weakening domestic demand and challenging external factors amid a slowdown in the euro area. Also, fiscal policy relaxation has led to widening government’s deficit-to-GDP ratios. At the same time, fiscal stimulus and the resulting boost in private consumption will begin to fade by 2020, the WB assessed.

Generally, the WB thinks that medium-term growth is hampered by emigration to western Europe and sustained progress in structural reforms. Those factors will trigger a shrinkage in working population and deterioration of private investment respectively. Therefore, the pace of future growth depends on the successful implementation of structural reforms to improve business environment, especially given a more challenging external environment.

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