Garanti Bank expects a 4 pct GDP growth rate in 2018 for Romania

Garanti Bank, one of the most dynamic banks on the local market, estimates that the growth rate of the gross domestic product (GDP) could reduce speed in 2018, to 4 percent, from 6.5 percent in 2017, mainly due to a slower pace of industry and trade connected to a possible economic deceleration in Germany and Italy, two of the top 3 countries where Romania exports.

According to the the bank’s latest Macroeconomic Report, industrial capacity increased in the last quarter 2017, above the post crisis average, and the main industries to advance should continue to be, as in previous quarters, car manufacturing, machinery and electrical equipment.

Garanti Bank estimates that inflation will increase, with a new peak most likely to be reached in the first quarter of the year, while the yearly average could register a jump, from 1.3 percent in 2017, to 4 percent in 2018.

Subsequently, Garanti Bank anticipates the National Bank of Romania (BNR) will act upon the rising price pressure and operate several hikes in 2018. Additionally, the bank expects the Central Bank to operate further rises of the monetary policy interest rate, which could reach 2.75 percent this year. BNR has already decided, during the first monetary policy meeting this year, to increase the key rate to 2 percent, after keeping it unchanged sine mid 2015.

The current account deficit continues to widen but it should not catch too much speed, as wages’ growth should be slower in 2018. The larger deficit which is accompanied by a possible investment climate deterioration may lead to depreciation pressures in 2018, pushing the EUR/RON parity to 4.78 by the end of the year.

Garanti Bank expects an increase in lending to companies and a moderate advance in consumer lending, with some guidance from the Central Bank to the banks not to increase household indebtedness.