Private consumption is projected to decelerate in 2018, as inflation increasingly weighs on real disposable income, but is expected to continue acting as the main growth driver and investment is forecast to strengthen on the back of a pick-up in the implementation of projects financed by EU funds.
Import growth is projected to continue outpacing that of exports, in line with strong private consumption. Accordingly, net exports will remain a drag on real GDP growth and the weakening of Romania’s trade balance is expected to lead to a gradual widening
of the current account deficit, which is forecast to reach 3.1% of GDP by 2017, 3.2% in 2018 and 3.4% in 2019.
After two consecutive years of falling consumer prices, inflation turned positive in 2017, despite being dampened by VAT rate cuts and lower excise duties on fuel. Headline inflation is projected to further pick up as wage hikes pass through to consumer prices and the effect of tax cuts fades away – or, in the case of excise duties, the cuts themselves are reversed. The European Commission forecasts inflation at 1% this year, 2.9% in 2018 and 3% in 2019.