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Romania Country Risk Report Q3 2018

Romania Country Risk Report Q3 2018

Despite real GDP growth peaking in 2017, Romania's economy will remain one of Emerging Europe's outperformers in the years ahead, suggesting the country will make further progress on its EU convergence. 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 in 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.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Slow Start Harbinger Of Downturn In 2018
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
External Dynamics Expose Romania's Vulnerability
Outlook On External Position
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
Tightening To Continue At A Slower Pace In 2019
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Pension Reform Raises Fiscal Risks
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
RON: Monetary Policy To Shape Trajectory
TABLE: CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The Romanian Economy To 2027
Major Untapped Growth Potential
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Political Risk To Remain High
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Progress Ahead Amid Geopolitical Uncertainty
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
Business Crime
TABLE: BUSINESS RESPONSE TO WHITE COLLAR CRIME AND ORGANISED CRIME
Education
TABLE: ROMANIA AND OECD AVERAGE – STUDENT PERFORMANCE SCORES (2015)
Chapter 5: BMI Global Macro Outlook
Key Divergences Emerging In World Economy
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: ROMANIA – MACROECONOMIC DATA & FORECASTS

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