The Commission revised its economic growth forecast for Romania to 4.2% in 2016 from 4.1%, and to 3.7% in 2017, from its previous estimate of 3.6%.
Driven by wage increases and fiscal relaxation, economic growth is forecast to peak in 2016 before moderating somewhat in 2017, the Commission notes.
However, the European Commission has worsened its forecast on the country’s fiscal deficit and sees it at the EU limit of 3% this year, from 2.8% expected previously, and to 3.8% in 2017, from a previous estimate of 3.7%.
Due to tax cuts and expenditure increases the fiscal deficit is set to increase substantially. New legal initiatives in the financial sector pose risks to the macroeconomic outlook, the Commission said in its report.
Inflation is projected to accelerate as of mid-2016, partially driven by wage increases, the report notes. The Commission sees inflation in Romania at -0.2% this year, from -0.3% seen previously, and at 2.5% in 2017, from its earlier estimate of 2.3%.
Unemployment is seen at 6.6% in 2016 and at 6.5% in 2017, unchanged from the previous forecast.