Present at the EBRD’s annual summit in Warsaw, the Budget Minister backed his encouraging outlook with the good industrial production and consumption data for Q1, data which can lead to a GDP growth of over 3.5 pc.
The Romanian economy recovered from the crisis also because the population and companies are encouraged to contract bank loans for consumption and investments, delegate Minister for budget Liviu Voinea stated several days ago. He maintained his optimistic tone yesterday too, at the annual European Bank for Reconstruction and Development (EBRD) summit in Warsaw, where the minister pointed out that the good industrial production and consumption data for Q1 supports the revising of the economic growth outlook from 2.2 percent to over 4 percent. Thus, Minister Voinea’s estimates remain the same for Q1: the GDP will grow by over 3.5 percent.
In this sense, Eurostat, the EU’s statistics office, announced yesterday in a communiqué that Romania registered in March the second-largest industrial production growth in the EU, namely 9.6 percent year-on-year, a level that was surpassed solely by Luxembourg. Luxembourg and Romania were followed by Hungary (8.1 percent) and the Czech Republic (7.2 percent). Belgium, Cyprus and Austria did not offer data and of the other 25 member states 14 registered hikes and 11 registered drops in industrial production year-on-year, the Eurostat communique shows. Within the Euro Zone, industrial production dropped by 0.1 percent.
The public revenues and expenditures budged for 2014 was built on an economic growth forecast of 2.2 percent. Last year the budget estimates pointed to the fact that the economy will grow by 1.6 percent but the GDP’s actual growth stood at 3.5 percent.
“The economy is doing extremely well, surpassing our expectations which are fairly conservative. We built the public budget by taking into account a GDP growth of 2.2 percent this year, however I am sure the GDP growth will surpass last year’s level.”
Ratings agencies will react accordingly
Likewise, the minister expects ratings agencies to reflect the economy’s improvement “soon.”
Romania is different, in the good sense, than the rest of the emerging markets and the Eastern European markets thanks to the low current account deficit, of the fact that it does not depend on natural gas imports from Russia, which in April had a 4 percent share in consumption, of the extremely good economic growth and of the commitment to join the Euro Zone in 2019. I expect ratings agencies to reflect this soon. The markets have already included this in the price of state bonds,” the Budget Minister added.
The government official also stated that Romania has entered an obvious exit stage in what concerns the agreement with the International Monetary Fund:
“Romania has an obvious exit strategy in the agreement with the IMF. Half-way through next year we will complete the agreement with the IMF and the European Commission. Romania needs a new anchor, both in order to send out a good signal on external markets, as well as for predictability, and the adoption of a commitment to join the Euro Zone in 2019 can ensure these things,” the minister stated.
This came as a reaction to the statement made by Romanian President Traian Basescu at the end of last week, when he declared himself “outraged” that Standard & Poor’s (S&P) maintains Romania in the category not recommended for investments, despite the fact that Romania’s deficit has fallen below 3 percent and its economic growth stands at 3.5 percent.
S&P, one of the most important international ratings agencies, decided last autumn to improve Romania’s rating outlook from “stable” to “positive” and there are big chances the rating will return to the “investment grade” category in the second half of this year.
According to zf.ro, a possible rating upgrade from S&P could occur by the end of May, and if not then the expectations will shift to the month of November, these being the two periods in which the agency revises its ratings. S&P was the first financial evaluation agency that downgraded Romania’s sovereign rating in the autumn of 2008 – when the world financial crisis started – to the “junk” category, so that Romania became the only EU member state whose rating had fallen below the threshold recommended for investments.
The rating has been maintained within that category for the last five years, despite the improvement of the economy’s fundamental indicators, of the drop in deficits and of three successive agreements with the IMF. From the other two great ratings agencies, Fitch and Moody’s, Romania currently has the “investment grade” rating. While Moody’s did not modify Romania’s rating during the crisis years, Fitch Rating downgraded Romania in the autumn of 2008, and then raised Romania’s rating one notch in mid-2011, which meant that the country returned to the acceptable investment risk category.