The rate at which the Romanian economy is growing will slow down to 5.5% of GDP, after having reached 8.3% last year, and the budget deficit will amount to 1% of GDP, says a survey by the Vienna Institute for International Economic Studies (WIIW).
The forecasts by the Austrian analysts are quite different from those recently agreed upon by the Romanian authorities and the IMF, which foresee a budget deficit of 0.7% of GDP and economic growth at 6% for this year. All forecasts are now coming under the spotlight due to the political instability in the country in the wake of the announcement for early elections, which could weaken governmental control over macroeconomic parameters. This means the NBR plan to maintain the inflation-curbing trend will be harder to achieve than initially expected.
The WIIW study shows that the Romanian economy grew by 5.9% in the first quarter, a lower rate than in the first quarter of last year when growth was 6.2%. Industrial output for the first five months of the year was 4.8% higher than for the corresponding period last year.
Consumption remains a significant driving force behind economic growth. Retail sales kept on increasing throughout May, gaining 19.2% on the same period in 2004. The highest growth was seen for food sales at nearly 23%.
The WIIW believes this year''s harvest will be poorer than last year''s, though industrial output will go up by 5%. Construction and trade should see the highest economic growth of all sectors. The same study also predicts a widening of the current account deficit by the end of the year to 8.3% of GDP, compared with the 7.75% level committed to by the Romanian authorities with the IMF.
Other analysts expect the current account will deteriorate still further, rising to 9% of GDP, since the deficit had reached 1.4bn euros after only four months into the year (77% higher than for the corresponding 2004 period). They also expect GDP to rise by no more than 6%. The Austrian institute blames the widening current account deficit on the rapid expansion of private consumption, combined with reduced governmental consumption and exports.
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