The commission also predicts a 3.7% GDP growth for Romania in 2020, from 3.1% in its spring forecast.
Romania’s annual inflation rate is envisaged at 4.2% in 2019 (from a previous projection of 3.6%) and at 3.7% in 2020 (from a previous projection of 3%).
“Following an annual growth of 4.1% in 2018, Romania’s real GDP growth accelerated in the first quarter of 2019 to 5.1% year-on-year (1.3% quarter-on-quarter). Private consumption remained the main driver, increasing 7.0% year-on-year thanks to still double-digit wage growth. Investment picked up, thanks mainly to a recovery in construction, spurred by recent fiscal stimulus. Export growth, by contrast, weakened to 3.2% year-on-year, while import growth climbed to 9.3%”, as per the commission’s summer economic forecast report released Wednesday.
According to the report, tight labour market conditions are expected to continue over the forecast horizon, with unemployment remaining close to its current, very low level. Wage growth is forecast to moderate to single digits in 2020, led by the expected slowdown in public wage growth.
“In 2018, HICP (Harmonised Index of Consumer Prices) inflation stood at 4.1%, the highest in the EU. Annual consumer price growth remained strong in the first quarter of 2019, at 3.8%, and is expected to exceed 4% in the second quarter, before decelerating again. Rising unprocessed and processed food prices explain the strong upward price dynamics boosted by a depreciation of the currency at the beginning of the year and strong consumption and wage growth. As a result, Romania’s annual headline inflation is expected to average 4.2% in 2019, before decelerating to 3.7% in 2020. The deceleration in 2020 is expected to follow moderating wage pressures and softer domestic demand,” the report also reads.