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BUCHAREST (Romania), October 10 (SeeNews) - Romania’s gross domestic product (GDP) is projected to increase by 4.2% in 2017 and by 3.7% in 2018, driven by strong private consumption and rising investments including structural funds from the EU, trade credit insurer Atradius said on Tuesday.
Romania has shown robust GDP growth rates over the last couple of years, mainly driven by surging domestic demand, Atradius said in its CEE Country Report for Romania report published on its website.
Romania's annual economic growth accelerated to 6.1% in the second quarter of 2017, above the initial estimate of 5.9% made in September, preliminary official data showed on Tuesday.
"Exports, mainly to the EU, have also picked up at a reasonable rate and are expected to grow again this year above 8%. The country maintains one of the strongest growth outlooks in the region," Atradius noted.
During 2017 and 2018 the deficit is expected to increase further due to the continuation of expansive fiscal policies. This leaves the government budget more dependent on a positive economic outlook, and there is still an urgent need for improving tax administration. However, at about 39% of GDP public debt is expected to remain moderate in 2017 and 2018, the report showed.
Corruption and graft remain major issues in Romanian politics and economics, and popular dissatisfaction and distrust with the political system run deep, Atradius also pointed out.
Besides internal challenges, Romania remains exposed to some external vulnerabilities. While the current account deficit has decreased from 12% of GDP in 2008 to 0.7% of GDP in 2014 it has increased again since then as high growth in domestic demand is driving up imports. Also, external debt is relatively high, at around 70% of GDP, Atradius noted.
While the country remains vulnerable to some capital outflows should there be adverse internal and external developments, there are some solid buffers in place, such as abundant international reserves which provide six months of import cover,a low public debt and a flexible exchange rate.
Referring to the Romanian banking sector, Atradius said that it has continued its trend of substantial improvement in 2016, with rising capital adequacy ratios and decreasing non-performing loans. However, the sector is still subject to elevated credit risk due to foreign exchange mismatches and low credit growth, it added.
In 2016, Romania's economy expanded by 4.8%.
In September, finance ministry analysts raised their forecast for Romania's 2017 economic growth to 5.6% from 5.2% projected previously based on expectations of a more robust performance across sectors.
The finance ministry analysts left unchanged their economic growth forecasts for the next three years made in April - 5.5% in 2018, and 5.7% in 2019 and 2020 each.
On Saturday, Standard & Poor's maintained Romania's rating at BBB-/A-3, with a stable outlook, and said that the country's budget and trade deficits will widen due to the consumption-focused growth.
Atradius is an international provider of trade credit insurance, surety and debt collection services. The company has 160 offices in over 50 countries worldwide, employing over 3,700 people.
(1 euro=4.5729 lei)