Editorial - New year, new government

With everyone’s hopes for a more predictable 2018 quickly gone out the window, the new year has already seen its share of political turmoil. And, before the end of January, Romania already has a brand-new government. However, left at the whim of political leaders who seem little concerned with the stability of their own country, the new government is walking a tightrope between fiscal discipline and finding the cash to fund some ambitious plans.  
Meanwhile, the economic growth is expected to slow down from an estimated level of 6.5 percent last year to around four percent in 2018. At least that is the forecast put forward by Garanti Bank in its latest Macroeconomic Report. The Turkish-based bank put the decline on “a slower pace of industry and trade related to a possible economic deceleration in Germany and Italy, two of the top three destinations of Romanian exports.” As for inflation, “Garanti Bank estimates that this indicator 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 four percent in 2018.” In this context, the bank expects the central bank (BNR) to “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.” The bank’s report also noted that during the first monetary policy meeting this year BNR had already increased the key rate to two percent, after keeping it unchanged since mid-2015.
In addition, the report points out that the current account deficit is expected to widen further, albeit at a slower pace, as wage growth is seen losing speed 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.”
As for the banking sector, the bank predicts a positive year for lending, especially in the corporate segment.
And while businesses still hope for some more predictability, Business Arena will continue to keep an eye on all the issues affecting the business community, reflecting its views, hopes and challenges.