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2019/06/13 / Erste Group Research

Romania Macro Outlook: Growth driven by household consumption

We revised upwards our economic growth forecast for 2019 to 4.5% (from 3.1%), due to stronger than expected growth in 1Q19 and signs of a recovery in the construction sector. The flipside of stronger economic growth is that the C/A deficit will continue to rise (although slower than in 2018) because imports of goods are still running high. The real GDP structure continues to show a strong profile of household consumption, while gross fixed capital formation could grow moderately this year. After reaching 4% in spring, inflation is likely to stay around these levels in the coming quarters.

The NBR's strategy to tighten liquidity control will remain in place and short-term rates will trade close to the Lombard rate, but we think that a potential hike in the policy rate will also be debated by the NBR's board in the future. We see the leu largely stable around present levels in the remainder of 2019 in the absence of strong external shocks. For the coming years, we favor a scenario with a small depreciation of the leu, which should facilitate the adjustment of the external imbalance. Political instability could rise after the opposition's victory in the European elections.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusRomania
Currency in focusRomanian Leu
Sector in focus-


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