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Banca Transilvania raises Romania's 2017 GDP growth fcast


Banca Transilvania said that Romania's economy will expand by 5.2% in 2017, up from a previous forecast of 4.7%, but warned about a strong divergence between overheating consumption and sluggish investments, seenews.com informs.

Banca Transilvania projects that Romania's economic growth will slow down to 4.1% in 2018, it said in its macroeconomic scenario November report.

In 2016, Romania's economy grew by 4.8% year-on-year, compared to a revised growth rate of 3.9% in 2015.

The government has projected 5.6% GDP growth in 2017.

Banca Transilvania said it does not expect the budget deficit to surpass 3% of GDP this year and in 2018, while for 2019 it forecasts a 2.5%/GDP deficit. Romania's  consolidated budget showed a deficit equivalent to 2.41% of GDP last year, compared to a shortfall of 1.47% of GDP in 2015.

Among the main risk factors that the Romanian economy will face are the acceleration of the economy accompanied by the return of twin deficits, an expansionary and pro-cyclical, but unsustainable policy-mix and several obstacles in terms of real economic convergence and development, Banca Transilvania said.

The bank sees Romania's 2017 inflation at 1.1%, while for 2018 the bank expects consumer prices to rise 3.1%. 

Romania's annual inflation rate was 1.8% in September, up from 1.2% in August, according to data from the national statistical board, INS. In its latest inflation report issued in August, Romania's central bank BNR increased its annual inflation forecasts for this year and next, to 1.9% and 3.2%, respectively, from 1.6% and 3.1% projected earlier.

In terms of monetary policy, Banca Transilvania expects a more expansionary monetary policy from the central bank, BNR.
In terms of monetary policy, Banca Transilvania expects BNR to raise its key rate to 2% this year and to 3.75% in 2018.

"BNR is to start the post-crisis cycle by the end of 2017, due to the acceleration of the inflation and to the accumulation of risks for the price stability and financial stability," the report showed.

On October 3, BNR maintained its monetary policy rate at a record low 1.75%. BNR's board also decided to narrow the corridor of interest rates on its standing facilities around the policy rate to ±1.25 percentage points from ±1.50 percentage points.

The central bank last changed its key rate in May 2015, when it cut it by 25 basis points.

The analysts also said they expect an average exchange rate of 4.57 lei per euro in 2017 and of 4.62 lei per euro in 2018.

Banca Transilvania [BSE: TLV] is a Romanian banking institution based in Cluj-Napoca. Its shares were trading 0.69% down at 2.1450 lei on the Bucharest Stock Exchange at 1200 CET.