EBRD revised its forecasts on the advance of the Romanian economy in 2018 and 2019

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Romania’s economy is expected to see a 4.2% growth this year, while the economic growth will slow to 3.6% next year, according to the latest forecast published on Thursday by the European Bank for Reconstruction and Development (EBRD).

Compared to the previous forecasts released in May, the EBRD has revised its estimates for the evolution of the Romanian economy by 0.4 percentage points this year from 4.6% to 4.2% and by 0.6 percentage points for next year, from 4.2% to 3.6%, according to Agerpres.

The EBRD argues that economic recovery continues in most of the countries where it invests, but risks remain due to global trade tensions, high indebtedness of companies and geopolitical instability. The EBRD expects the economies in the countries where it invests to grow by 3.2% in 2018 and by 2.6% in 2019, both revised downwards as a result of the slowdown in Turkey’s economy.

“Bulgaria has good performances, likewise Romania, despite signs of overheating,” the EBRD said.

The financial institution warns, however, that UK exiting from the European Union without an agreement on trade and investment would affect most South Eastern European countries in the regions where the EBRD is investing.

“In total, the economic impact of a Brexit without agreement is expected to be the biggest for the economies in South-Eastern Europe, mainly by disrupting trade links with the UK and other advanced economies in Europe, impacting the reform process and reducing European structural and cohesion funds”, the EBRD warns.

Despite the revision, the EBRD is more optimistic than the International Monetary Fund on the prospects of the Romanian economy. At the beginning of October, the IMF revised its estimates for the evolution of the Romanian economy down to 4% in 2018, by 1.1 percentage points less than estimated in Spring, predicting that in 2019 Romania will register economic growth 3.4%, 0.1 percentage points lower than estimated in April.

On the other hand, the Romanian National Prognosis Commission expects a GDP growth of 5.5% in 2018, followed by 5.7% rates in 2019 and 2020, and 5% in 2021.

The European Bank for Reconstruction and Development (EBRD) was set up in 1991 to invest in the former Communist bloc states and help them make the transition to a market economy. In recent years, the EBRD has begun to shift its focus from the former Soviet bloc to North Africa and the Middle East. In Romania, the EBRD is among the top institutional investors. So far, the bank has invested nearly 8 billion euros in the country in over 400 projects. Only in 2017 invested 550 million euros in Romania. Of this funding, over € 500 million has been provided to the private sector, the highest level in the last seven years.

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