Romania’s economy will grow by 4.2% this year and by 3.7% in 2017, according to the European Commission’s country report on Romania.

The economy is expanding, but the growth-rate is above the potential, and it will bring several vulnerabilities such as growing budget deficit and the public debt.

The new fiscal cuts from this year and next year, as well as the wage increases in the public sector, will increase the deficit to 3.8% of the GDP by 2017. The public debt could rise above 40% during this period.

The private consumption has reached the maximum level after 2008, due to the increase in household revenues. The wage increases, as well as the negative inflation, have boosted the consumption.

The budget expansion, which stimulates the internal consumption, without targeting the demand too, could create new internal and external imbalances.

editor@romania-insider.com