EBRD also expects Romania’s economy to grow by 3.2% in 2020.
The EBRD said private consumption has been the main growth driver over the past two years (though at a slower rate in 2018), sustained by a cyclic fiscal policy, including wage increases and a decrease in consumption and income taxes. The investment contribution to the economic growth was also positive due to increased absorption of EU funds.
The unemployment rate, below 4%, is the lowest of the past decade, making staff recruitment difficult and stimulating wage raises.
The EBRD warned against the extension of macroeconomic imbalances, with the current account deficit surging to 4.6% of the GDP in 2018 (from 3.2% of the GDP in 2017), and the budget deficit reaching 3% of the GDP due to laxer fiscal policies. The inflation also is a cause for concern, reaching the highest level of the past five years (5.4% in June 2018), above the Romanian central bank’s target of 2.5% +/- one percentage point. The annual inflation rate stood at 3.3% at the end of 2018.
The EBRD also pointed out that the general government debt still is at a low level, relative to the regional standards, accounting for approximately 37% of the GDP”.