“Economic growth in Romania accelerated in 2017, with real GDP estimated to have grown by 6.7% (year-on-year) – a post-crisis high. The main driver of growth was private consumption, supported by indirect tax cuts and wage hikes both in the public and the private sectors. After contracting in 2016, total investment started to grow again in 2017. Its pace of recovery, however, remained subdued as public investment fell sharply for the second consecutive year,” the Commission said in its report.
The boom in private consumption has led to an increase in imports. As a consequence, net exports have acted as a drag on real GDP growth, despite relatively strong export growth.
Looking ahead, GDP growth is forecast to decelerate to 4.5% in 2018 and 4% in 2019. The growth of private consumption is expected to be more tempered in 2018, as inflation weighs more heavily on real disposable incomes and wage growth slows down. Nevertheless, private consumption is expected to continue acting as the main growth driver over the forecast horizon. Investment is forecast to strengthen on the back of a pick-up in the implementation of projects financed by EU funds, the Commission noted.