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Country Report 2017
Romania
István P. Székely
Director
European Commission, DG Economic and Financial Affairs
Bucharest, 15 March 2017 European Semester
Stability and Growth Pact
Macro
eco
no
mic
Im
bala
nces
Pro
ced
ure
Strong
cyclical
growth
Fiscal
expansion Structural
barriers
Public
debt
Pro-cyclical fiscal policy
Wages
Current
Account
Inflation
Spreads
Limited
potential
growth
Cyclical upswing consumption-driven
-4
-2
0
2
4
6
8
10
11 12 13 14 15 16
% Private consumption
Public consumption
Gross investment
Net exports
Other
GDP growth
Pro-cyclical fiscal policy and growth above potential
-5,0
-4,0
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
-3,0
-2,5
-2,0
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
11 12 13 14 15 16 17 18
%
Fiscal impulse Output gap (rhs)
Deficit to widen on tax cuts and expenditure increases
30
31
32
33
34
35
36
37
38
39
2010 2011 2012 2013 2014 2015 2016 2017 2018
Revenues Expenditures
Total revenues and expenditures adjusted for the cyclical component and one-off and other temporary measures
Forecast
Tax compliance remains low
41,3
37,2 36,7 34,5
37,9
13,5 14,4 15,0 14,7 14,0
0
5
10
15
20
25
30
35
40
45
50
2010 2011 2012 2013 2014
%
Romania EU-27
Deteriorating budget deficit and public debt increasing
With deficit widening public debt projected to rise… …and public debt is rising faster than for peers
0
2
4
6
8
10
12
14
Romania peer countries average
2010-2018 cumulative change in percent
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014 2015 2016 2017 2018
Peer average
Romania
Public debt to GDP
Public debt ratios to gradually deteriorate
30
35
40
45
50
55
60
12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Baseline no-policy change scenario SGP institutional scenario
Convergence Programme scenario
Volatile public sector wage growth
80
90
100
110
120
130
140
150
160
170
09Q4 10Q4 11Q4 12Q4 13Q4 14Q4 15Q4 16Q4
2012=100
Manufacturing(Nace C) Business services(G_N)
Public and other services(O_S)
Quality of public investment key for potential growth
One of the highest rate of public investment…
AUT
BEL
BGR HRV
CYP
CZE
DNK
EST
FIN FRA
DEU
GRC HUN
IRL
ITA
LVA
LTU LUX
MLT
NLD
POL
PRT
RO
SVK
SVN
ESP
SWE
GBR
1
2
3
4
5
6
3 3,5 4 4,5 5 5,5 6 6,5
Public
GF
CF
spendin
g,
2006-2
015 a
vera
ge, %
of G
DP
Quality of infrastructure
…but quality of investment is low
0
1
2
3
4
5
Roads
Air transportinfrastructure
Electricitysupply
Portinfrastructure
Railroadinfrastructure
Overallinfrastructure
2016-17
2010-11
The banking sector remains sound
…while profitability is improving
-10
-5
0
5
10
15
20
25
07 08 09 10 11 12 13 14 15 16
%
Return on Equity (%)EU (changing composition)Euro Area (changing composition)
Balance sheets are strengthening…
0
5
10
15
20
25
sept.09
sept.10
sept.11
sept.12
sept.13
sept.14
sept.15
sept.16
Non-performing loans (EBA definition)
Non-performing loans (NBR definition)
Link to the 2017 country report: http://ec.europa.eu/europe2020/pdf/csr2016/cr2016_romania_en.pdf
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