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2018/03/12 / Erste Group Research

Romania Macro Outlook

We have revised upwards our economic growth forecast to 4.7% in 2018 (from 4.1%), as global economic activity continues to strengthen and local investments are already performing better. Our underlying view about the Romanian economy nevertheless remains unchanged and we foresee a normalization of growth this year after very strong real GDP in 2017, which was explained by one-off items like agricultural output and the impact of an ultra-loose fiscal policy on consumption.

The inflation rate will remain well above the NBR's target until the autumn, due to statistical effects related to previous cuts in taxation and increases in administered energy prices. Risks of second round inflationary effects are present, amid decelerating but still robust household consumption, and the NBR could deliver two more hikes in the policy rate to 2.75% this year. We see these two remaining hikes in 2018 as data-dependent (local inflation prints) and connected to the decisions of other central banks in the CEE region in order to avoid a high interest rate differential. The monetary tightening cycle and a gradual decrease in the liquidity surplus from the money market should flatten the short end of the yield curve. At the same time, 10Y yields are vulnerable to a change in investor sentiment towards emerging markets, due to the extreme flatness of the 5Y/10Y segment.

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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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