Romania’s economy is expected to grow at around 3% in 2015 and 3.2% in 2016, after 2.8% last year.
According to the EBRD report, recent and prospective interest rate cuts, enabled by inflation falling on the back of energy and food prices, will continue to boost domestic demand in 2015 and 2016.
“Rising industrial confidence and the deprivation of inventories may lead to a rise in investments after two years. A recent reduction in non-performing loans (NPLs) following proactive provisioning policies by the central bank is expected to help credit supply,” the report reads.
The EBRD expects the budget expenditure to rise in order to absorb more EU funds, as absorption rate still remains the lowest in European Union.
“Annual average inflation is expected to remain at an average of 0.5% in 2015, on the back of cuts in VAT on food products, as well as low inflation expectations and lower commodity prices.”
The EBRD’s latest Regional Economic Prospects report predicts overall stagnation in 2015 across all 35 countries covered and meager expansion of just 1.4% in 2016. But the picture is bleak mainly due to recession in Russia, which may impact many other economies, said acting Chief Economist Hans Peter Lankes.