Country Economic Forecasts > Romania

Flash estimates show that Q3 GDP growth slowed slightly more than expected, rising 0.6% on the quarter and with the year-on-year increase down to 4.6%, reflecting the gradual fading of the expansionary fiscal policies that had dominated earlier this year. We expect Q4 to be slightly stronger than Q3, but still reflecting a moderate slowdown in H2; we now forecast 4.8% growth for 2016, down from 5.1% seen last month.But growth is being driven by pro-cyclical fiscal easing, which is causing some concern. The budget deficit has moved more firmly into negative territory following the series of tax cuts and public sector wage increases. Although boosting real incomes and output growth in the short term, these measures are undermining the hard work of the previous few years in getting the public finances under control. The budget deficit is forecast to rise to 3% of GDP this year and then 3.2% in 2017.After this year's very strong performance, we forecast a slowdown in GDP growth to 3.1% in 2017 and then around 2% a year in 2018-19. And risks are tilted to the downside, as fiscal policy puts more pressure on government revenues and leads to growing imbalances throughout the economy.