Positive outlook for Romania’s economy: the GDP’s annual growth rate revised at 2.9% by Garanti Bank

Garanti Bank, one of the most innovative and dynamic banks on the local market, revised the Gross Domestic Product (GDP) growth expectations for 2014 from 2.6% to 2.9% in its latest Quarterly Macroeconomic Report, corresponding to Q2 2014, said the bank in a statement.

This is due to higher than expected results in the first quarter, as well as to an overall positive outlook for Romania’s economic development, with stabilized macro environment, cheaper financing and improved business sentiment that might attract investors.

According to the quoted Macroeconomic Report, some deceleration of the growth in the industrial production sector is anticipated in the next quarters of 2014. Meanwhile, after it contracted in first quarter of the year and also registered poor performances in 2013, the construction sector is expected to recover.

Public investments and EU funds absorption are lagging much behind expectations and the desired level. However, a significantly better performance of the investments is expected in the rest of 2014, especially in the infrastructural works segment. The anticipated improvement of the investments is based on the projects financed with EU funds, especially those in the transportation segment.

As for the dynamic of the exports, a slowdown is expected for this year, given that the exceptional production of transport equipment and machinery during 2013 will actually work as a negative base effect for 2014. In regards to the imports, some acceleration can be expected on the back of the rebound of domestic demand. Overall, these elements should not impact significantly the current account deficit, which should remain at around 1.1% of GDP in 2014, being more than 100% covered by the foreign direct investments (FDI).

Garanti Bank’s specialists are optimistic in regards to the FDI (Foreign Direct Investment) level, which in the first four months of 2014 came at EUR 785 million, 9% above the one registered in the similar period of last year, and the expected level in 2014 is at around EUR 3 billion (2% of GDP).

For the following period there is still potential for inflows of both short and long term foreign capital, supported by favorable liquidity dynamics in developed countries, leading Garanti Bank to adjust its end-year outlook of the EUR/RON rate of exchange to 4.45, from 4.55 as expected initially.

The favorable financing conditions in local currency should remain the driver of the lending recovery for the next period.

The rebound in domestic demand should be transferred slowly to the financing sector as well, but this is dependent of the consumption’s sustainability in the next quarters.

You can find the report here