April 19 (SeeNews) - The Romanian unit of Turkish financial group Garanti said on Monday it sees Romania's economic growth at 3.7% in 2016 and budget deficit under 3% of GDP due to buoyant consumption.
The bank projects that the main drivers of the economy in 2016 will remain trade and ITC, as the real estate sector’s contribution to GDP could further intensify, it said in its latest quarterly macroeconomic report.
“Trade is high, some service sectors, such as the IT and outsourcing, are booming and the real estate have started to show clear signs of rebound," CEO Ufuk Tandogan said in the statement. "As such, we can only expect this year to follow the positive outlook and see the local economy continues its progress."
The residential market is just facing the start of a new cycle, whereas the rapidly growing service sector will increase demand for office spaces, it added.
Garanti Bank also said it expects prices to drop in the first half of the year, driven by VAT cuts and that the annual inflation will enter positive territory in the second half of the year.
Furthermore, the VAT cut on food products from 24% to 9% implemented in 2015, the general VAT cut from 24% to 20% as of January 1, as well as the 25% increase of wages in public healthcare, will continue to show their effects on the budget execution this year, the bank added.
Romania's state budget posted a surplus of 0.8 billion lei ($202 million/178 million euro) in the first two months of the year.
Garanti Bank also said it does not expect the central bank to raise the key interest rate before 2017, whereas the rate on the minimum reserve requirements is likely to be further cut from the current 12% for foreign currency liabilities and 8% for lei liabilities, to 9% and 6%, respectively.
($=0.8844 euro)