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January 17, 2021
BUSINESS

Foreign investors concerned about Romanian political unrest

The Foreign Investors Council (FIC) is concerned about the recent developments in Romanian politics which may affect stability and economic growth, as well as the country’s image on the international markets. According to a press release, the action of the political establishment these days adds further uncertainty to the already existing one, the consequence being a decline in consumers and investors’ confidence. ‘The lack of stability and predictability are important barriers in the way of investors and they may produce even more serious effects now that Romania needs capital so badly,’ reads a release signed by Steven van Groningen, President of the Foreign Investors Council, who is also CEO of Raiffeisen Bank.The members of the Foreign Investors Council have made important long term investment and will continue to be present in Romania even after the current terms of local politicians are over, FIC president assures, adding that ‘Withdrawals of capital from Romania are out of the question. Investors are interested to continue to invest in Romania, because the long term potential exists.’ In conclusion, Steven van Groningen states that ‘Romania should take advantage of its strengths more, reinforce its economic position in the South-Eastern European region, but none of that is possible without predictability and investors’ trust in the business environment.’  Business people’s lack of confidence also comes from the fact that the same political tension continues to hurt the exchange rate, with the central bank posting a rate of 4.5275 lei to the euro and 3.6848 lei to the US dollar yesterday, setting new all-time record lows, amidst a depreciation suffered by the local currency in the second part of the inter-bank trading session on Friday. On the inter0-bank market, the exchange rate fell to less than RON 4.53/EUR in the first two minutes of trading, having closed on RON 4.5375 – 4.5399 /EUR on Friday.

It was close to the all-time record low of RON 4.5400/EUR recorded the same day.Traders say the central bank is still active, but more discretely compared to last week, Mediafax reports.

Capital Economics: Romania would survive temporary suspension of agreement with IMF, EU

Romania would survive a temporary suspension of its agreement with the IMF and EU caused by the deterioration of its political crisis, but the most likely scenario is that the local political stage will calm down in the near future, which would end additional market tension, Capital Economics anticipates. The London-based consultancy describes three possible scenarios for the denouement of the current political crisis in Romania. The most probable one is that things will calm down in the near future, an evolution that would also end the additional tension added by the political situation on the market. ‘It would be good to know that Romania has overcome periods of political instability before.’ Capital Economic analysts note, reminding of the president’s impeachment in 2007. A second option would be a deterioration of the political situation to the point where the implementation of the agreement with the IMF would be prevented or the Government would try to consolidate its popularity, defecting from the programme agreed on with the international financial institutions, for example by relaxing tax policies or delaying privatisation. In a case like that, the IMF and the EU would suspend their review missions to Romania, which would lead to a postponement of the disbursement of the foreign financing instalments. The IMF suspended its agreement with Romania in 2009, amidst political instability before the presidential election. Despite the pressure the local currency is subjected to, Romania would probably survive a temporary suspension of the programme thanks to its substantial foreign currency reserves and to the financing strategy adopted for this year, the Government having already made reserves to finance budget deficit and pay debts falling due in 2012. The third scenario proposed by Capital Economics would entail a termination of the international financial assistance programme by the European Commission should the EU Executive initiate infringement procedures.

 

 

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