EU expects Romania’s growth drivers to shift from net exports to domestic demand

By bne IntelliNews November 6, 2013

The EU expects the domestic demand for consumption and investments to drive Romania’s growth to 2.1% in 2014, after net exports push up the country’s GDP by an estimated 2.2% y/y this year, according to the 2013 Autumn Forecast. Further rise in private consumption and the continuation of investments would further accelerate the growth to 2.4% in 2015, the EU projects.

The forecast is based on certain optimistic assumptions. Investment would regain momentum supported by better absorption of EU funds as major infrastructure projects are expected to gain traction. The forecast does not include precise expectations for the absorption rates in the coming years however. Similarly, the EU assumes that the private consumption would pick up on the back for improving consumer confidence.

Domestic demand’s contribution to GDP growth will shift from negative 0.3pps in 2013 to positive 2.2pps in 2014 and 2.7pps in 2015. Net exports’ contribution on the opposite will weaken from positive 3.5pps in 2013 to negative 0.1pps in 2014 and negative 0.3pps in 2015.

Fiscal consolidation is expected to continue mildly in the coming years, but risks are related to i. less tax-rich growth associated with domestic demand  ii. renewed accumulation of arrears especially at local level and iii. limited progress in restructuring of state-owned enterprises resulting in renewed progress to budget. All these risks are not negligible but rather relevant. The ESA deficit would shrink from 3%-of-GDP in 2012 to 2.5%/GDP in 2013 and 2%/GDP-possibly 2.2%/GDP including extraordinary co-financing of EU-funded projects, in 2014. The structural deficit is forecast to mildly improve over the forecast horizon from about 2% in 2013 to 1.5% in 2015.

In response to stronger domestic demand, the Current Account deficit is seen as slightly widening from 1.2% of GDP in 2013 to 1.8% of GDP in 2015.

Inflation is projected to decelerate further to an average of 2.5% in 2014 as falling food prices are expected to drive it to historical lows in the first half of 2014. In 2015, inflation is set to average 3.4% given the steady recovery in domestic demand and the on-going price convergence towards the EU average.

Related Articles

IMF recommends fiscal consolidation for Romania

The International Monetary Fund (IMF) has estimated that the fiscal policies envisaged by Romania will result in a wide deviation (of over 2% of GDP) from the optimum 1.5% of GDP medium-term budget ... more

Owner of Romania’s Dedeman reportedly close to signing largest ever deal in the Romanian office segment

Dragos Paval, owner of Romania’s biggest DIY retailer Dedeman, is reportedly close to signing an agreement with Africa Israel Investments for the acquisition of an office building project in ... more

RBI doubles net profit y/y in Q1 as Russian business recovers

Raiffeisen Bank International (RBI), the second largest bank operating across Central and Eastern Europe by assets, reported that net profit almost doubled year-on-year to €220mn in the first ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss