April 5 (SeeNews) - A closing output gap, along with labor market tightening and fiscal policy uncertainties, is expected to lead to a deceleration in Romania's economic expansion over the medium term, the World Bank said on Friday.
Romania's real gross domestic product growth is seen slowing down from an estimated 4.1% in 2018 to 3.6% this year, 3.3% in 2020, and 3.1% in 2021, the World Bank said in an Economic Update for Europe and Central Asia.
"Over the medium term, fiscal policy should be re-balanced from boosting consumption to mobilizing investment, primarily from EU funds, with the aim of supporting a sustainable EU convergence path and social inclusion," the World Bank advised.
After peaking in the spring of 2018, inflation is expected to stabilize at 3.5% this year and 3.4% in 2020, reflecting slowing growth in domestic demand.
The country's current account balance is expected to widen from 4.7% last year to 5.2% in 2019 and 5.3% in 2020, due to the expected slowdown in Romania’s traditional export markets, coupled with persistently high international commodity prices.
Strong private consumption aided by the expansionary fiscal policy and continued growth in real wages, partly supported by minimum wage increases, should boost real incomes and lead to further declines in poverty incidence, according to the World Bank.