20170317-法国巴黎银行-ROMANIA_ECONOMIC_OUTLOOKTHE_BANK_FOR_A_CHANGING_WORLD_16页_1mb

Romania Economic Outlook Summary (March 2017)

Core Content Overview

This report provides an economic outlook for Romania for the years 2017 and 2018, analyzing key macroeconomic indicators such as GDP growth, inflation, public finances, and monetary policy. It is produced by Bank BGZ BNP Paribas and reviewed by BNP Paribas, with the latter being a majority shareholder. The analysis does not include investment research recommendations.

Main Economic Forecasts

• GDP Growth:

  • Revised to 2.8% for 2017 from the previous forecast of 2.2%, due to stronger consumer spending.
  • Expected to grow at 2.4% in 2018, in line with Romania's potential growth rate.

• Private Consumption:

  • Expected to grow at 6.3% in 2017 and 5.1% in 2018, driven by increased household purchasing power from tax cuts, wage increases, and a tight labor market.

• Fixed Investment:

  • Projected to grow at only 1.0% in 2017, constrained by low EU funds inflow, rising institutional uncertainty, and limited government funding capacity.
  • Expected to increase to 4.0% in 2018.

• Exports and Imports:

  • Exports are forecasted to grow at 7.2% in 2017 and 6.7% in 2018.
  • Imports are expected to grow at 8.5% in 2017 and 8.1% in 2018.

Inflation Trends

• CPI Inflation:

  • Expected to average 1.6% in 2017 due to the impact of tax cuts.
  • Projected to rise to 3.1% in 2018, driven by intensifying demand-side pressures and wage growth.

• Underlying Inflation:

  • Excluding tax effects, inflation is running at about 2.0% in 2017.
  • Supply-side factors, including higher energy tariffs and fuel prices, are expected to contribute to inflation acceleration in the coming years.

Monetary Policy Outlook

• Policy Rate Hikes:

  • The National Bank of Romania (NBR) is expected to tighten monetary policy in 2017, with a 25bp rate hike in Q4 2017.
  • A 100bp increase in 2018 is anticipated, bringing the main rate to 3.00% by the end of 2018.
  • The real policy rate is expected to remain close to zero by the end of 2018.

• Interest Rate Corridor:

  • Tightening is likely to start with a narrowing of the interest-rate corridor due to the divergence between market rates and the policy rate.

Public Finances

• Government Deficit:

  • The general government deficit is expected to exceed the 3% of GDP EU threshold in 2017.
  • The government is pursuing an expansionary fiscal policy, including tax cuts and wage increases, which may lead to a fiscal tightening in the second half of 2017 to avoid triggering the Excessive Deficit Procedure.

• Budget Performance:

  • The government is likely to reduce capital spending to improve budget performance, which may have long-term negative implications for economic growth.

External Accounts

• Current Account Deficit:
  • Expected to widen to 3.5% of GDP in 2017 and 3.6% of GDP in 2018.
  • Driven by worsening net trade and income account imbalances, though the service account surplus is expected to continue growing.

FX Outlook

• EURRON Exchange Rate:
  • The current EURRON rate is around 4.40 in 2017 and is expected to rise to 4.51 by the end of 2018.
  • Tighter monetary policy and robust manufacturing output are expected to support a slightly stronger leu.

Economic Policies Impact

• The economy has been responding to a mix of fiscal and monetary easing, which supported growth in recent years.
• However, with the fiscal deficit expected to rise and inflation likely to accelerate, the policy mix is expected to shift toward tighter fiscal and monetary policies.
• This shift may lead to a slowdown in GDP growth, from 2.8% in 2017 to 2.4% in 2018.

Key Factors Influencing Growth

• Consumer Spending: Stronger due to fiscal loosening, wage increases, and tax cuts.
• Investment: Weak in 2017 due to low EU funds, institutional uncertainty, and limited government capacity.
• Inflation: Expected to rise in 2018 as the impact of tax cuts fades and underlying price pressures intensify.
• Monetary Policy: Tightening is anticipated to counter rising inflation and stabilize the economy.

Legal Disclaimer

• This document is investment research for the purposes of MiFID and is not intended for retail investors.
• It is marketing communication and directed at Professional Clients and Eligible Counterparties.
• The securities described may not be eligible for sale in all jurisdictions or to certain categories of investors.
• The information and opinions are based on public sources and not independently verified.
• No liability is accepted for any inaccuracies or omissions.
• The document is not an offer to buy or sell any securities or investment instruments.
• It is not intended to provide investment advice or fiduciary duty.
• Past performance is not an indicator of future performance.

Jurisdictional Notes

• The report is distributed in various countries, including the UK, France, Germany, Belgium, Ireland, Italy, the Netherlands, Portugal, Spain, Switzerland, Canada, the United States, and Brazil, each with specific regulatory and legal notices.
• The distribution is restricted to Relevant Persons as defined by local regulations.
• In the UK, the document is communicated by BNP Paribas London Branch.
• In the Netherlands, it is distributed by BNP Paribas Fortis SA/NV, Netherlands Branch.
• In Switzerland, it is intended for Qualified Investors only.
• In the United States, it is distributed only to institutional investors under specific exemptions.
• In Brazil, it is for information purposes only and does not represent an offer or request for investment.