March 24 (SeeNews) - CFA Romania, an association of investment professionals, said on Friday that the state of the country's economy is expected to improve in the next 12 months.
The CFA Society Romania Macroeconomic Confidence Index for February increased by 2 points compared to the previous month, reaching 56.9 points, CFA said in a monthly survey.
The improvement was mainly due to a more positive perception of the current economic situation, an indicator which rose by 4.3 points to 67.9 points.
IMF mission chief in Romania Reza Baqir warned Romania last week that without further measures to address the impact of tax cuts and wage and pension hikes, the budget deficit will increase to 3.8% of GDP in 2018. He added that in IMF's view the way forward to bring flexibility into the budget is for the government to realise that there is no room left for tax cuts.
Romania's economy is expected to grow by 3.8% in 2017, according to the IMF's latest economic forecast issued in October last year. The 2017 budget bill is built on projections of 5.2% economic growth and sets deficit equivalent to 2.99% of GDP, a target that many find too ambitious.
In 2016, Romania's economy expanded by 4.8% year-on-year compared to a revised growth rate of 3.9% in 2015. The country's consolidated budget showed a deficit equivalent to 2.41% of the projected GDP last year, compared to 1.47% of GDP in 2015, according to finance ministry data.
CFA analysts said they are expecting, on average, inflation of 1.50% in the period March 2017- March 2018, similar to the rate projected in January.
Romania's annual inflation accelerated to 0.2% in February from 0.1% in January, according to the latest data from the national statistical office. In its latest inflation report issued in February, Romania's central bank, BNR, lowered its 2017 inflation forecast to 1.7% from previously projected 2.1%.
The analysts expect an exchange rate of 4.55 lei per euro in the next six months and 4.56 lei per euro in 2018, both up 500 pips from the previous survey.
On March 17, Romanian leu weakened the most against the euro since October 2012, prompting analysts to think the central bank, BNR, might have increased its tolerance towards downward pressure on the domestic currency. On that day, BNR set its reference exchange rate at 4.5654 lei per euro, the lowest exchange rate for the Romanian currency since October 24, 2012, when it reached 4.5754 lei per euro.
Half of CFA analysts said they expect global economic conditions to be normal, while 28.6% expect an unfavourable situation and 21.4% are optimistic.
The CFA Society Romania Macroeconomic Confidence Index, first released by CFA Society Romania in May 2011, represents an indicator that aims at quantifying financial analysts' expectations about economic activity in Romania for a time horizon of one year.
The Index takes values between 0 (no confidence) and 100 (complete confidence in the Romanian economy) and is calculated based on six questions regarding current conditions of business and labor market; expectations about business, labour market, personal income and personal wealth.
(1 euro = 4.5555 lei)