BCR, the largest bank in Romania’s banking system by assets, lowered its economic growth forecast from 4.1% to 3.8%, as soon as the National Statistics Institute published detailed economic growth figures.
Isn’t that forecast a little too pessimistic?
“Judging by the second quarter data, it is actually an optimistic forecast,” says Horia Braun, chief economist of BCR.
Raiffeisen Bank economists, too, are getting ready to revise their forecast downwards from 4.2% to less than 4%.
“We will probably revise our growth forecast to 3.5% – 4%, and most likely towards 3.5%. It is clear now we cannot possibly have growth of more than 4% this year,” says Ionut Dumitru, chief economist of Raiffeisen Bank.
UniCredit Bank keeps its 3.9% growth forecast but points in a report that there are ‘negative risks’. Banca Transilvania still expects 4.3% economic growth, but that forecast was announced before the details about the GDP surfaced. At the same time ING expects 3.8% growth.
What actually happened? The economy grew by 4% year on year in the first half. The GDP rose 1.4% in the second quarter compared with the first quarter, but this is, as economists put it, a ‘base effect’. Moreover, the industry is not doing well, and investments are disappointing.
“The stagnation in the first quarter of 2018 to the fourth quarter of 2017 was not a typical thing. Therefore, we are dealing with a base effect in the second quarter growth of 1.4%. Moreover, the growth structure is problematic,” Horia Braun says.
“Investments are disappointing. The industry is showing signs of weakness. furthermore, in Europe and in Germany, the industry is slowing down, as July data show. There is trouble in the transatlantic relations. If the US impose sanctions on Germany, Germany will export fewer cars, and will, therefore, need fewer components and we know some of them are made in Romania.”
Last week, Alejandro Hajdenberg, resident representative of the International Monetary Fund in Romania, announced the IMF was preparing to revise the economic growth forecast for the country downwards to 4% – 4.5% from the initial expectation of 5.1%. Romania’s finance minister Eugen Teodorovici said the end of the year would prove the government, which built its budget around a 5.1% economic growth, was right. From the look of things, however, it seems the IMF is the most optimistic institution when it comes to Romania’s economic growth trend.
(English version by Loredana Fratila-Cristescu)