Economic growth is forecast to remain strong in 2017 as well, at 3.6%.
The Commission has improved its deficit forecast for Romania to 1.2% of GDP this year and 2.8% in 2016, from 1.6% of GDP in 2015 and 3.5% of GDP in 2016 anticipated in its spring forecast.
Romania’s inflation is seen remaining in negative territory until mid-2016 but should recover rapidly in 2017, the Commission reckons, expecting the consumer price index will stand at -0.4% this year, -0.3% in 2016 and then + 2.3% in 2017.
“With a tight labor market and deflation, the 4 pps cut in the standard VAT rate is expected to push private consumption to a post-crisis peak in 2016 and fuel real GDP growth of 4.1%. Private consumption growth is forecast to moderate in 2017 as the impact of VAT cuts fades and inflation picks up. GDP growth is nevertheless expected to remain above potential at 3.6% in 2017,” the European Commission said in its report.
The Commission sees the country’s unemployment rate at 6.7% this year and 6.6% in 2016.