The expectation of such a strong growth after the GDP growth of 7% in 2017 is a signal that can be interpreted as an invitation to companies to expand and invest, because, even though many economists think the target is hard to reach, they include in all scenarios growth of 4% to 5%, which would be very good, anyway.
“It will be hard to reach 6% economic growth, because the factors that led to the 7% rise in the GDP in 2017, based on consumer spending, have run out of steam. A 6% growth would be possible if the investments replaced consumer spending as the growth driver,” says economist Laurian Lungu.
“Yet investments won’t come overnight. They have not been made in the past few years. If they start this year, the results will show in the future not in 2018. But a sound growth will be achieved.”
The National Statistics institute on Monday confirmed the two-digit rise in consumer spending in 2017, almost 11% year-on-year, which was the key to the economic success nobody saw coming, not even the National Commission of Forecasting, which had initially expected the GDP to grow by 5.2%. Most economists deemed even that target impossible to achieve and the scenario is repeating, and pessimism prevails again.
“I’m not saying 6% growth is impossible. But it cannot coexist with very small deficits as the [National Commission of] Forecasting expects – such as a current account deficit of 2.8% of the GDP instead of 3.1% at the end of last year or a decline in inflation from 3.2% at the end of 2017 to 2.6% at the end of 2018. This scenario does not make sense,” says Ionut Dumitru, chief economist of Raiffeisen Bank.
The scenario proposed by the National Commission of Forecasting brings a fundamental change: consumer spending should go up by 6.3% and investment (gross capital formation) by 7.9%. Therefore, the hypothesis is that investments will replace consumer spending as the economy’s main driver.
“Investments were very small last year, and the public investment was at a post-crisis low. Considering 2018 will come with a significant pressure on the budget, too, because of the rise in social expenditure, it is hard to believe the government will have more money for investments, so they could become a very strong driver of the economy,” says Adrian Codirlasu, chairman of the Association of Financial Analysts of Romania.
(English version by Loredana Fratila-Cristescu)