Economy faces uncertain future

While the populist political discourse intensifies, experts agree that Romania’s short-term economic outlook is dominated by uncertainty, amid deteriorating business sentiment. The European Commission’s Winter 2019 Economic Forecast sees Romania’s estimated 2019 GDP growth at 3.8 percent, well below the government’s 5.5 percent forecast, included in the 2019 budget.

“The composition of growth is expected to remain fairly stable, with private consumption still the main driver. The evolution of investment in 2019 will largely depend on the impact of policies introduced in December 2018 concerning the banking, energy and telecommunications sectors. The contribution of net exports is expected to remain negative but progressively less so in 2019 and 2020,” the European Commission’s report emphasizes, pointing out that “a further depreciation of the currency vis-à-vis the euro poses an upward risk to price levels.” It also notes that “risks to the forecast are clearly on the downside. Besides a potential negative impact on credit, the impact of the government’s emergency ordinance in December could have a much broader effect. For example, significantly increased unpredictability of the business environment in Romania may have a negative knock-on effect on investment decisions.”
Meanwhile, National Statistics Board data showed that the annual consumer price inflation rose to 3.8 percent in February, from 3.3 percent the previous month, with food prices gaining 4.46 percent year-on-year, while non-food prices increased by 3.74 percent. In turn, services prices went up 3.08 percent in February. According to media reports, the central bank (BNR) raised its 2019 annual inflation forecast to three percent from 2.9 percent.
In turn, experts with the AmCham Macroeconomics Task Force have recently released an analysis, focusing on the latest exchange rate trends. According to AmCham, “the analysis identifies inflation, salaries increases and the trade deficit as the leading causes of the exchange rate fluctuations and calls for measures that limit macroeconomic imbalances and create a sustainable economic growth.”
In this context, reflecting the general mood in the business community, around 52 percent of local entrepreneurs believe that the domestic tax and regulatory environment worsened in 2018, according the ‘Startup Barometer’ by EY Romania, Impact Hub Bucharest and Startarium. It also revealed that the fear of failure was among the main obstacles for those who want to start and develop businesses in Romania. Moreover, poor education, fiscal unpredictability and the current political situation were also listed as obstacles by most entrepreneurs.
Business Arena will continue to keep an eye on all the issues affecting the business community, reflecting its views, hopes and challenges.

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