-0.2 C
March 9, 2021

BCR anticipates frail economic upturn in 2011 – 1.2 pc

Romania could register a feeble, 1.2 per cent growth in 2011, after two years of decline when the economy has shrunken by approximately 9 per cent in real terms. Coming out of recession will be a cumbersome process full of unpopular measures the government will have to implement in order for Romania to reach the budget deficit target of 4.4 per cent of GDP’, BCR chief-economist Lucian Anghel stated during the presentation of the Macroeconomic Report Romania under the sign ’f austerity, reads a press release. The 2011 economic growth will be primarily sustained by private company investment while household consumption will most likely post marginal increase. Attracting new FDI if the local context is stable, increasing the rate of EU fund absorption and completing structural reforms in the current and probably future agreement with the IMF and European Union are key-elements to resuming sustainable economic growth, reads the report.

‘Inflation may drop to a half of what it is now at the end of 2001, after the shock caused by the VAT hike this summer has phased out. In a moderate scenario considering a good agricultural production and, implicitly, a favourable effect of volatile prices, inflation could stand at the upper limit of the central bank targeted range, otherwise we estimate that the inflation rate will be marginally bigger than the target of 3 per cent + 1 percentage point’, Anghel stated.

The BCR chief-economist thinks that, if inflationist pressures drop, the central bank may resume the cycle of relaxing the key-interest in 2011 by 0.5 per cent, to 5.75 per cent, in order to send a signal towards the banks to lower interest rates turn and thus help economy. According to the BCR report, the key-interest rate will stay at 5.25 per cent at the end of 2012. Major investment projects in infrastructure, energy, agriculture or processing industry can enable an orientation of financial resources towards sectors that are able to generate healthy economic growth on a longer term.

BCR estimates that the industrial performance will remain closely correlated to the eurozone trend in 2011, with a majority of Romanian export going into those countries a. The sector may register 3-4 per cent growth in 2011. On the other hand, the bank notes the construction sector does not appear to be coming back, therefore moving into a positive territory at an annual level will still take a while. Given the fact that fiscal predictability and political stability are key-elements in successful business plan, it is easily understandable why investors are still prudent in launching new projects in Romania. However, one has to note the fact that no major investor has pulled out of Romania so far and that international investors consider Romania as less risky in terms of the credit default swaps than countries such as Greece, Ireland, Portugal or Hungary the BCR report also states.

At the same time, given the rather small chance that the 2011 state budget law may be adopted before the end of the year, the RON could close 2010 very close to an exchange rate of 4.3 to the euro, BCR analysts anticipate.

Related posts

PwC Net Zero Economy Index: The world needs to cut carbon intensity five times faster to hit the 1.5°C Paris Agreement target


E-Distribuție Dobrogea premises, turned into anti-COVID vaccination center in Călărași


Gov’t to continue talks with IMF, EC representatives June 19 through 30

Nine O' Clock