, may act as a signal – especially amid growing uncertainties about brexit. in one of the peer economies in the region, the czech national bank raised the policy rate twice – under special circumstances, after exiting from the exchange rate commitment, and in the context of a rising inflation. the european central bank decided to taper the asset purchase programme, even though no date has been set as yet for ending this programme. although at different speeds and with notable exceptions ( the bank of japan, for instance ), it becomes increasingly clear that the low interest rate era is drawing to a close. emerging economies are usually affected when interest rates go up in advanced economies and it is essential that such episodes find them in good order domestically. this is why the ongoing tensions surrounding macroeconomic equilibria in romania since the previous report are a reason for concern. the chief driver of economic growth was domestic consumption ( figure 21 ), while the external balance made a negative contribution because of the widening deficit on trade in goods ( figure 22 ). investment did not contribute significantly to economic growth. economic growth above potential is not always a cause for concern, particularly when it takes place after a recession, for instance. moreover, there are a number of arguments that show that the economy ’ s growth potential can be larger than that calculated at present for both technical reasons ( the time series are not long enough and were influenced by the 2009 - 2010 recession ) and fundamental reasons, which, however, can be turned to good account only by structural adjustments. thus, full employment is a textbook requirement for fulfilling the economic growth potential : important resources come, in this respect, from the almost 3 million romanians working abroad and circa 4 million inactive romanians. nor is the growth structure per se a systemic risk, especially if part of the pick - up in domestic demand is accommodated by the rise in domestic supply. nevertheless, the developments in the twin deficits ( the fiscal deficit and the current account deficit ) are a cause for concern, as they signal exactly the abovepotential growth of economic activity at present, which may jeopardise medium - term financial stability. the expansionary fiscal policy pursued starting with 2016, by applying the 2015 tax code, has carried on in 2017, causing the fiscal space gained in 2010 - 2015 to be exhausted ( figure 23 ). the current account deficit - to - gdp ratio, though well below its pre - crisis levels, has posted divergent developments from those in the other eu emerging

turning point was reached earlier in 2010. this would be consistent with the lagged response of loan developments to economic activity over the business cycle that was also observed in past cycles. the annual growth rate of loans to households stood at 2. 8 % in september and thereby remained at levels seen in previous months. banks have continued to gradually increase the weight of credit to the private sector in the overall size of their balance sheets, but the challenge remains to expand the availability of such credit when demand picks up further. where necessary, to address this challenge, banks should retain earnings, turn to the market to strengthen further their capital bases or take full advantage of government support measures for recapitalisation. to sum up, the current key ecb interest rates remain appropriate. we therefore decided to leave them unchanged. taking into account all the new information and analyses which have become available since our meeting on 7 october 2010, we continue to expect price developments to remain moderate over the policy - relevant medium - term horizon. recent economic data are consistent with our assessment that the underlying momentum of the recovery remains positive. at the same time, uncertainty is prevailing. a cross - check of the outcome of our economic analysis with that of the monetary analysis confirms that inflationary pressures over the medium term remain contained. we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2 % over the medium term. the firm anchoring of inflation expectations remains of the essence. turning to fiscal policies, there is a clear need to strengthen public confidence in the capacity of governments to return to sustainable public finances, reduce risk premia in interest rates and thus support sustainable growth over the medium term. to this end, it is essential that countries pursue credible multi - year consolidation plans and fully implement the planned consolidation measures. in their 2011 budgets, they need to specify credible fiscal adjustment measures, focusing on the expenditure side. any positive fiscal developments that may emerge, reflecting factors such as a more favourable than expected environment, should be exploited to make faster progress with fiscal consolidation. the urgent implementation of far - reaching structural reforms is essential to enhance the prospects for higher sustainable growth. major reforms are particularly necessary in those countries that have experienced a loss of competitiveness in the past or that are suffering from high fiscal and external deficits. the removal of labour market rigidities and the strengthening of productivity growth would further