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February 4, 2023

EBRD: Economic recovery weak on a short term, optimistic medium-term outlook

The European bank for Reconstruction and Development (EBRD) says that, currently, things do not look very bright for Romania in the context of the steep economic downturn. The EBRD specialists forecast a slow recovery of the economy on a short term. However, an appendix to the 2009 Transition Report EBRD presented yesterday shows that, on a medium to long term, Romania’s outlook is promising thanks to its diversified exports and strategic position. The international financial institution also anticipates an 8 per cent economic decrease rate for Romania this year and a slight recovery next year – 1 per cent growth rate. Romania should adopt reforms in the area of justice, in its business registration processes and in law enforcement in order to secure local companies’ competitiveness on the single European market. The Government is also supposed to act with austerity in what concerns public spending. EBRD warns that Romanian businesses ‘continue to struggle’ in order to conserve their competitiveness on the EU market, trying to overcome the adverse conditions of the global economic crisis.

Current account deficit to be adjusted to 6 pc GDP in 2009

Romania’s current account deficit will be adjusted to about 6 per cent of the GDP in 2009 from 12.3 per cent of GDP in 2008 and the FDI will fall by 64 per cent to USD 4.9 bn this year, EBRD foresees in its latest annual transition report released on Monday. EBRD also expects Romania’s trade deficit to reach USD 11 bn with USD 37 bn worth of export and USD 48 bn worth of import in 2009. At the same time, the same forecast suggests the budget deficit may be up to 7.3 per cent of the GDP and the inflation rate could be 4.5 per cent this year.

One of the best transition indicator: ‘3+’

The bank has preserved Romania’s transition indicator to ‘3+’, one of the best in the region. The banking sector reform and the liberalization of interest rates were scored “3+’, and so is the infrastructure reform in general which is nonetheless undermined by the condition of the road infrastructure. In terms of privatization, Romania’s score is ‘4-‘ on a scale from 1 to 4, but the transitions core for the business environment governing legislative framework is ‘3-‘ on the same scale. For price liberalization and for developing the foreign trade and currency exchange systems, the country was rated ‘4+’. The high level of financing of the local credit market by banks with foreign capital makes Romanian economy vulnerable to possible cash withdrawals with propagation effects upon the banking, corporate and residential sectors.

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