Macrostability: Good, but not enough
The very low inflation rate, along with a moderate economic recovery in the Eurozone, monetary policy divergence between the FED and the ECB, political tensions between Russia and Ukraine and the outcome of the Greek elections are key external events that could influence Romania’s economic development in 2015.
There is potential political volatility ahead related to a possible reconfiguration of the political landscape triggered by the results of the 2014 presidential election and by a rebalancing of power within the two main political parties: the Liberal Party (PNL) and the Social-Democrat Party (PSD). A number of senior Liberal politicians recently suggested they would like to form a new government and a no-confidence vote against the current government cannot be ruled out.
We estimate 2015 economic growth at 2.2%, driven mainly by domestic demand, while exports are likely to offer lower support compared to 2014. Public investments are again a big unknown for economic growth and we read with skepticism the government’s plans in this area, as laid down in the 2015 state budget.
Monetary easing is likely to continue in 2015, centered upon fresh reductions in minimum reserves. The EURRON is likely to fluctuate more than in 2014, due to the external and political risks previously mentioned, but the NBR is expected to keep a close eye on the FX market and to continue to intervene occasionally to tame volatility. The current low yield environment for local currency bonds is likely to be preserved in 2015 as long as the global context is supportive.