Romania is the largest electronics producer in Central and Eastern Europe and is rich in iron ore, oil, salt, uranium, nickel, copper and natural gas; and a regional leader in multiple fields, such as IT and motor vehicle production.

In the past 20years Romania has also grown into a major centre for mobile technology, information security, and related hardware research Dacia automobiles.

Romania’s top 10 exports are vehicles, machinery, chemical goods, electronic products, electrical equipment, pharmaceuticals, transport equipment, basic metals, food products, and rubber and plastics.

The economy was affected by the financial crisis of 2007–08 and shrank in 2009 by 7.1pc.

Driven by strong industrial exports and excellent agricultural harvests in 2015, the economy grew by 3.9pc.

The reforms undertaken by the coalition government formed in June 2017 lay down priorities for 2017-20 including investment in infrastructure, health care, education, job creation, and small and medium enterprise development, in addition to tax and pension reforms.

In the first-quarter of 2017, annual economic growth accelerated to 5.7pc on the back of strong consumption and further to 6.1pc in the second-quarter on the back of strong performance of the industrial sector and rising consumption.

The second-quarter’s impressive growth demonstrates the country has benefited from a healthy eurozone and a stronger global economy.

The rapid growth was spurred by strong consumer spending. Households have been supported by wage hikes for public sector employees, low overall unemployment and cuts in the VAT.

However, concerns about governance and weak administration limit Romania’s competitive advantages.

The finance ministry analysts forecast 2017 growth at 5.6pc based on expectations of a more robust performance across sectors while Raiffeisen Bank Romania forecasts 2017 economic growth at 4.9pc.

FocusEconomics panellists expect the economy to slow slightly in the second-half, but will continue to be supported by strong domestic demand.

They predict an expansion of 5.2pc in 2017, mainly driven by households’ consumption before decelerating to 3.8pc in 2018.

On the fiscal side, the ruling coalition had announced changes to major taxes due in 2018, including replacing a corporate flat tax of 16pc on profit with a progressive tax on turnover.

But after sharply negative market reaction and criticism from local and foreign investors, it has now scrapped a plan to tax companies’ turnover. But the finance ministry was still assessing a planned solidarity tax for top earners.

Romania’s 2017 budget based on projections of 5.2pc economic growth sets a deficit equivalent to 2.99pc of GDP.

The Economist, however, estimates that budget deficit will exceed the ceiling of three per cent of GDP, reaching 3.2pc in 2017.

The European Commission expects Romania’s to run the EU’s largest deficits this year and next at around 3.9pc of GDP. The headline general government balance is projected to reach a deficit of 3.5pc and 3.7pc of GDP in 2017 and 2018.

Bulgaria

Though Bulgaria is traditionally an agricultural economy, it is now considerably industrialised.

Industry depends on the heavy manufacturing sectors (metallurgical, chemical, machine building), however, the most dynamic sectors are textile, pharmaceutical products, cosmetic products, the mobile telephone industry and the software industry.

Bulgaria’s main mineral resources include bauxite, copper, lead, zinc, coal, lignite, iron ore, oil and natural gas.

The advancement of structural reforms, the introduction of the currency board and the expectations of EU accession released a decade of exceptionally high growth and improved living standards since 2000s.

The economy was severely hit by the 2008 financial crisis, a series of political crises and Eurozone developments in 2013–14 which loosened some of the gains achieved earlier.

Consequently, annual GDP growth slowed to 3.6pc in 2009 and averaged just 0.3pc in six-years to 2014.

According to the National Statistical Institute, the economy posted 3.5pc growth YoY in the first quarter of 2017, unchanged over the previous two quarters, attributable to an increase of 4.1pc in domestic consumption which offset a 5.4pc decline in gross-fixed capital formation.

In the second-quarter, the economy posted 3.6pc growth with domestic consumption up 4.2pc and gross-capital formation lower by 0.9pc.

The Bulgarian finance minister sees the economy growing by four per cent this year but expects 2018 growth slightly down at 3.9pc. The IMF also sees 2017 economy growing at 3.6pc with slightly lower growth of 3.2pc in 2018.

Unemployment rate is expected to drop to 6.6pc in 2017 and 6.4pc next year, from 7.7pc at end-2016.

The EBRD expects the economy to grow 3.2pc in 2017 and three per cent in 2018. FocusEconomics Consensus Forecast panellists expect the economy to grow 4.6pc in 2017. For 2018, the panel expects the economy to expand 3.7pc.

The finance ministry ended 2016 with a surplus of 0.6pc of GDP. Improved growth should help the country to end 2017 with a smaller deficit than the targeted of 1.4pc of GDP.

The Balkan government which aims to achieve a balanced budget by 2020, sees fiscal deficit narrower than its target of one per cent and 0.5pc of GDP for 2018 and 2019.

For 2017-2018, Euler Hermes forecasts the annual fiscal deficit to remain low at about one per cent of GDP while Moody’s credit ratings agency has confirmed that an increased degree of EU funds utilisation would lead to a small budget deficit of 0.6pc of GDP in 2017, comfortably reaching the authorities’ target of fiscal balance by 2020.

Published in Dawn, The Business and Finance Weekly, October 23rd, 2017