IMF revises downwards Romania’s economic growth forecast for 2018, 2019

Source: (09/10/2018)

The International Monetary Fund has revised downwards its forecast for Romania’s economy, both for this year and next year, after a moderation of the stimuli that led to the robust growth of 2017, according to the latest World Economic Outlook report.

In April, the IMF had estimated that Malta and Romania would have the largest economic growth in Europe in 2018, of 5.7 and 5.1 percent respectively. In this week’s report, the Romanian economy is only forecast to grow by 4 percent this year, and a 3.4 percent growth is estimated for 2019, a small decrease of 0.1 percent since April’s forecast.

“Romania’s economy had a robust 6.9 percent growth in 2017 following fiscal stimuli and a solid external demand. The growth will slow down to 4 percent in 2018 and continue to decrease to 3.4 percent in 2019, as the stimuli become more moderate,” the report shows.

Alejandro Hajdenberg, the IMF representative in Romania, had warned at the beginning of September that the IMF is considering a change to Romania’s growth prognosis this year.

As for consumer prices in Romania, the IMF estimates have remained unchanged, at an annual growth of 4.7 percent, but they were revised downwards for 2019, when the increase in prices will slow down to 2.7 percent (compared to a 3.1 percent prognosis in the spring). In 2017, Romania had an average annual inflation of 1.3 percent.

The IMF also changed its predictions on Romania’s current account deficit, to 3.5 percent of GDP (compared to 3.7 percent estimated in April). For next year, the organization expects Romania’s current account deficit to be around 3.4 percent of GDP (compared to its previous 3.7 percent prognosis).

As for the world economy, the IMF had a downward growth prognosis of 3.7 percent in 2018 – 0.2 percent lower than its April predictions.

“The downward revision reflects the surprises that have affected activity at the beginning of 2018 in a series of advanced economies, the negative effects of the trade policies approved or implemented between April and September, as well as the weaker outlook for a number of important emerging economies,” the IMF writes.

Romania’s National Prognosis Commission had estimated a GDP growth of 6.1 percent in 2018, followed by 5.7 percent in 2019 and 2020 and 5 percent in 2021. The European Commission expects a 4.5 percent growth in 2018 and 3.9 percent in 2019.