For 2019, The EC revised its economic growth projection for Romania to 3.9% from 4% in the winter forecast released in February.
“Growth is forecast to decelerate in 2018 but will remain robust. The labor market is expected to remain tight over the forecast horizon. Inflation picked up in late 2017 and is set to rise further in 2018 before tempering somewhat in 2019. The budget deficit is projected to increase significantly, mostly due to public sector wage increases,” the Commission noted.
In 2018, the EC sees Romania’s budget deficit widening to 3.4% of GDP, well above the 3% limit. The unified wage law, enacted in summer 2017, increased gross public wages by 25% in January 2018 and contains additional increases for doctors and teachers.
Inflation is forecast to be 4.2% for 2018 as a whole and to decline to 3.4% in 2019 as energy price inflation moderates. Core inflation is projected to increase from 0.8% in 2017 to 3.3% in 2018 and 3.5% in 2019.
Growth rates for the EU and the euro area beat expectations in 2017 to reach a 10-year high at 2.4%. Growth is set to remain strong in 2018 and ease only slightly in 2019, with growth of 2.3% and 2.0% respectively in both the EU and the euro area.
“Private consumption remains strong, while exports and investment have increased. Unemployment continues to fall and is now around pre-crisis levels. However, the economy is more exposed to external risk factors, which have strengthened and become more negative,” the Commission said.