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Romania Country Risk Report Q1 2019

Romania Country Risk Report Q1 2019

Despite real GDP growth peaking in 2017, Romania's economy will remain one of emerging Europe's outperformers in the years ahead, suggesting that the country will make further progress on its EU convergence story Growth will be relatively broad-based, with private consumption, exports and investment all performing well

However, loose monetary and fiscal policies have contributed to the strong economic performance of late, and with inflationary pressures building and the trade deficit rapidly widening, risks of overheating are mounting We believe the National Bank of Romania will be forced to tighten policy fairly aggressively starting in late 2018 More gradual tightening will follow in 2019

The PSD-ALDE coalition government will face broad uncertainty and weaker stability in the years ahead on the back of its focus on the implementation of a relatively controversial judicial reform and fiscal trajectory

The government will come under increasing pressure to reverse its loose fiscal policy, given the rapid increase in its fiscal deficit

While we do not project a major deterioration in the near term, owing to a low starting level of public debt and relatively low borrowing costs, the current trajectory poses mounting challenges for the longer term and alongside a rapidly deteriorating external position will restrict future flexibility in responding to unexpected shocks

Key Risks

Persistent political uncertainty and instability may weigh on Romania's long-term growth outlook

The government's pro-cyclical fiscal loosening and unpredictable short- and medium-term budget strategy pose threats to the country's creditworthiness

Romania's external dynamics, namely its widening current account deficit and rising reliance on hot money, expose the country to a higher risk of a sudden capital flight Romania Country Risk Q1 2019


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Robust Wage Growth A Tailwind And A Headwind For Romania
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Current Account To Begin Narrowing Beyond 2019
Outlook On External Position
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
NBR To Delay Tightening Until H219
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Romania On An Unsustainable Fiscal Trajectory
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
RON: Depreciation To Lose Pace In H219
Romania Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Contents10-Year Forecast
The Romanian Economy To 2027
Major Untapped Growth Potential
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Progress Ahead Amid Geopolitical Uncertainty
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: FREE TRADE AGREEMENTS
TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISKS
TABLE: WATER RISKS
Global Macro Outlook
Continued Growth Divergence And Policy Risks Ahead
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: ROMANIA – MACROECONOMIC DATA & FORECASTS

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