Local lender Raiffeisen Bank has revised up its estimate on Romania’s economic growth in 2017 from 5.7% to 6.8%, based on the evolution in the first nine months of this year.

The GDP increase reached 7% between January and September, according to official data. It was related to the rapid consumption growth, amounting to 13.3% during this period. Investments, public spending and exports also recorded increases, and local agriculture had a significant contribution to GDP growth in the third quarter.

Romania’s economy accelerates by 8.8% in the third quarter

Based on these statistics, Raiffeisen estimates a GDP growth of 6.8% in 2017 and a 4.2% growth in 2018.

The annual inflation rate remained at a high level in November, namely 3.2%, exceeding the estimates. The annual inflation rate will continue to grow rapidly in the coming quarter, with a peak of 5% in the second quarter of 2018, Raiffeisen estimates.

The budget deficit amounted to 0.8% of the GDP between January and October. The annual target of 3% is likely to be reached, with much of the deficit to be generated in December. "The target for 2018 was also fixed at 3%, but there is a risk that it will be exceeded", according to Raiffeisen Bank analysis.

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Given macroeconomic conditions, analysts believe measures to tighten monetary policy will be accelerating. Raiffeisen forecasts a five-step increase in the monetary policy interest rate, compared to a three-step increase, as previously estimated, from 1.75% today to 3% at the end of 2018. Romania’s National Bank will likely decide the first rate increase at its January 8 meeting.

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editor@romania-insider.com