20170317-法国巴黎银行-ROMANIA_ECONOMIC_OUTLOOK_THE_BANK_FOR_A_CHANGING_WORLD_15页_1mb

Romania Economic Outlook - March 2017 Summary

Core Content Overview

This report provides an economic outlook for Romania for the years 2017 and 2018, focusing on GDP growth, inflation, monetary policy, public finances, and external accounts. It is authored by Bank BGZ BNP Paribas and reviewed by BNP Paribas, with the latter being a majority shareholder. The analysis does not include investment recommendations.

GDP Growth Forecasts

• 2017 GDP Growth: Revised to 2.8% from 2.2%, driven by stronger consumer spending due to fiscal loosening.
• 2018 GDP Growth: Expected to be 2.4%, in line with Romania's potential growth rate.
• Components of Growth:
  • Private consumption is the main growth driver, projected at 6.3% in 2017 and 5.1% in 2018.
  • Fixed investment is expected to grow by only 1.0% in 2017 and 4.0% in 2018, constrained by low EU funds inflow, rising uncertainty, and limited government funding capacity.
  • Exports are forecasted to grow by 7.2% in 2017 and 6.7% in 2018.
  • Imports are projected to grow by 8.5% in 2017 and 8.1% in 2018.

Inflation Outlook

• CPI Inflation:
  • 2017: Expected to average 1.6% y/y, partly due to tax cuts and lower oil prices.
  • 2018: Anticipated to rise to 3.1% y/y, driven by intensifying demand-side pressures and rising wage costs.
• Underlying Inflation: Estimated to be around 2%, excluding tax effects.
• Fuel Price Impact: The removal of the extra excise duty on fuel is expected to absorb most of the rebound in fuel-price inflation.

Monetary Policy

• Policy Rate Hikes:
  • A 25bp rate hike is expected in H2 2017, followed by 100bp in 2018, bringing the main rate to 3.00% by end-2018.
  • The real policy rate is expected to remain close to zero by end-2018.
• Interest-Rate Corridor: Expected to narrow as part of the tightening cycle.
• FX Outlook:
  • The EURRON is expected to be around 4.40 in 2017 and rise to 4.51 by end-2018.
  • The fair EURRON rate is estimated to be in the 4.40-4.50 range, based on manufacturing productivity.

Public Finances

• Fiscal Policy: The government has implemented substantial fiscal loosening, including VAT rate cuts, removal of fuel excise duties, and increased public-sector wages and pensions.
• Government Deficit: Likely to exceed the EU-mandated threshold of 3% of GDP in 2017.
• Fiscal Tightening: Expected to begin in H2 2017 to avoid triggering the Excessive Deficit Procedure.
• Capital Spending: The government plans to reduce capital spending, which may hinder long-term growth.

External Accounts

• Current Account Deficit: Expected to widen to 3.5% of GDP in 2017 and 3.6% in 2018.
• Trade Balance: Projected to be -10.4 EUR bn in 2017 and -11.2 EUR bn in 2018.
• Service Account Surplus: Continues to grow over the last few quarters.
• Net Trade Imbalance: A key driver of the current account deficit.

Key Economic Indicators

Main Views and Key Information

• Growth Drivers: Consumer spending remains the key growth driver, supported by tax cuts, wage increases, and tighter labor markets.
• Investment Constraints: Low EU funds inflow, institutional uncertainty, and limited government funding are expected to constrain investment growth.
• Inflation Dynamics: Lower taxes are expected to conceal inflation dynamics in 2017, but underlying pressures will push CPI inflation above 3% in 2018.
• Monetary Policy Tightening: The National Bank of Romania is expected to tighten monetary policy, starting with a narrowing of the interest-rate corridor and followed by rate hikes.
• Exchange Rate Outlook: The EURRON is forecasted to rise slightly to 4.51 by end-2018, reflecting tighter monetary policy and robust manufacturing output.
• Fiscal Policy Risks: The expansionary fiscal policy may exceed the EU deficit threshold, prompting fiscal tightening in the second half of 2017.

Legal and Disclosure Notes

• The analysis is not investment research and does not contain investment recommendations.
• It is intended for professional clients and eligible counterparties under MiFID.
• The report is subject to legal restrictions in various jurisdictions, and is only available to Relevant Persons.
• No liability is accepted for investment decisions or losses resulting from reliance on the document.