“Risks to the 2012 growth forecast are tilted to the downside,” the Commission said in its interim economic forecast report Thursday.
It said Romania’s exports to EU countries, which amount to 70% of total exports, are likely to be hit by falling demand and should provide less support to economic growth in 2012.
Net exports were the key driver for growth in the first half of 2011, but their contribution to growth faded in the second half of the year, the report noted. For 2012, the Commission expects domestic demand will be the main driver of growth.
“Although consumers are expected to continue their balance-sheets adjustment in the first half of 2012, the forecast improvement in employment and lower inflation should support income and thus contribute to a revival of private consumption in the second half of 2012,” the report noted.
On the other hand, government consumption is not expected to contribute much to growth in 2012 as it is constrained by the need for further fiscal consolidation.
Inflation is projected to further decline in the first half of 2012, before increasing again in the second half, but still staying within the central bank’s target range, according to the report.
“Over the medium term, risks to the inflation outlook appear skewed to the upside due to the need to deregulate energy markets and further hikes in other administered prices,” the Commission said.