EC estimate for Romania's economic growth this year at 1.7%

Continued uncertainty in financial markets relating to the sustainability of public finances in some euro-area economies as well as fears of contagion affecting the core euro-area countries will contribute to subdued growth, the document notes.

Government consumption is not expected to contribute much to growth in 2012 as it is constrained by the need for further fiscal consolidation and the continued reduction of public sector employment. Investment is expected to be an important growth driver next year, given the country's high needs to modernize its public infrastructure, partly with the help of co-financing from EU structural funds. Private investment is, however, likely to be weaker on account of increased uncertainty linked to the 2012 elections and due to the lagged effects of the turbulences in international financial markets during 2011.

As for inflation, it is expected to remain within the target range in Q4-2011, dipping to 5.9 pct in 2011. The downward trend is expected to continue, with the inflation falling to 3.4 pct in 2012. Nonetheless, the Commission states that looking further ahead, the temporary downward pressure on headline price indices stemming from volatile food prices may reverse in the second half of 2012, although inflation is currently assumed to stay within the target range.

The budget deficit in 2012 is expected to decrease further to 3.7% of GDP under a no-policy-change assumption. The Commission notes that the authorities have not yet finalized the 2012 budget, so therefore the current forecast does not incorporate any additional policy measures that may be included in the 2012 budget. According to the current projections, Romania's budget deficit is supposed to fall to 2.9% of GDP in 2013 as an effect of the continued decrease of the GDP share of total spending and of the slight rise in the GDP share of total revenues.