Without returning to its high level of 2016, growth should remain strong in 2017. As previously, the main driver is domestic demand. Household consumption (70% of GDP) will be the leading element. Once again, households will benefit from employment increases, wages and pensions rise—both in the private and public sectors—and from taxes fall (remains to be defined). Wages are being driven by the increasing scarcity of labour as a result of emigration and the ageing of the population, despite the financial incentives being used to encourage mobility among the unemployed and reduce long-term unemployment. Consumption will however slow sharply because of the declining impact of the tax cuts and the return of inflation, connected with the overloading of existing production capacities.
Investment (24% of GDP) will continue at a strong level against a background of low interest rates and the positive outlook for growth. It will be sustained in construction, telecommunications and computing. Investment aid (0.52% of GDP) will be available to the SME sector. Despite the poor level of take up because of the bureaucracy involved and administrative shortcomings at the local level, European funds will contribute in maintaining the moderate growth in public investment, but still not enough to make up for the infrastructure inadequacies. The State will continue to guarantee half of loans taken out by first time buyers with the aim of encouraging lending and lowering the cost. However, there is one unknown that arises from the application of the Datio in solutum law approved in April 2016 that allows the borrowers to discharge their commitment by transferring the ownership of their house to the creditor, and the inhibitive effect that this could have on the supply of credit. This comes on top of the cost for the banks (530 million euros according to the Central Bank, or 4.2% of outstanding credit) of converting the lei at the rate of exchange at the time of the signing of household loans denominated in Swiss francs (law of October 2016). The cost will rise considerably if it is extended to loans in euros (more than half of outstanding credit). The Constitutional Court, examining the law, is likely to amend the application. With substantial non-performing loans (10% in October 2016), but with a gradual reduction in these, and the laborious application of securities, prudence will remain the key for the banks, 90% subsidiaries of Austrian, Dutch, French and Greek groups. They will continue to repay their debts to the parent companies, whilst building up a domestic deposits base.
Exports (39% of GDP) will increase at a reasonable rate, but below that of imports under the impetus of domestic demand, and the contribution from trade will remain negative. Sales of cars (DACIA and Ford) and tyres (a quarter of exports), together with wood, fertilizers, metals, medicines, machines and clothing will feel the benefits of any increase in European demand. Exports of cereals and oil crops will depend on the harvest.