BUSINESS

Positive changes in Romania’s economic outlook

The economy will grow by more than 1 pc this year. Exports and industrial production can no longer support the economy in 2013 and should be replaced by internal consumption and investments, Greg Konieczny, Fund Manager of Fondul Proprietatea, stated.

Romania’s economic look is encouraging because the country made considerable progress in recent years, Greg Konieczny, Executive Vice President, Templeton Emerging Markets Group and Fund Manager of Fondul Proprietatea stated, according to a press release. His statements show that Romania is now in a good position to surpass the EU’s average economic growth in 2013. Unfortunately the general mood about the economy among the public at large is still negative, despite the economic recovery which started in 2011 and continued in 2012, he mentioned.“Numbers clearly show that the country’s macroeconomic situation is very sound. Romania has low public debt to GDP (33.3 percent) compared to the Czech Republic (41.2 percent), Poland (56.3 percent) or Hungary (80.6 percent), and well below the EU average of 82.5 percent1. The country also has large foreign reserves and has managed to keep the budget deficit and the current account deficit under control. The solid fundamentals are also reflected by the credit default swap (CDS) market, where, as of 21 January 2013, the Romanian spread was only 190 compared to 383 for Portugal, 276 for Hungary, 251 for Spain and 228 for Italy”, further said Greg Konieczny. He also considers that Romania also has an advantage over similar countries in the region because of its relatively low tax levels. Thus, he expects to see a positive change in the country’s economic outlook in the next 12 months. “In the last two years the economy was mainly propelled by exports (although export growth slowed down in 2012 because of the Euro Area’s problems) and by industrial production. Nevertheless, these factors can no longer support the economy in 2013 and should be replaced by internal consumption and investments,” the Fund Manager of Fondul Proprietatea said.Overall, Greg Konieczny estimates that the Romanian economy will grow by over 1 per cent this year, while the RON should grow stronger against the EUR. “If Romania’s solid fundamentals are coupled with the government’s desire to implement reforms we believe the country has the potential to end up being among the leaders of economic growth in the European Union,” the FP official added. Consumption recovery, supported by salary hikes and lowering unemploymentGreg Konieczny pointed out that he has already seen a recovery of retail consumption in 2012 from the very depressed levels that followed the austerity measures of 2009 and 2010. “This recovery should be further supported by wage increases (including the recent ones in the public sector), as well as by the low unemployment (7.3 percent at the end of the third quarter of 20122) which should translate into an improving sentiment in the market”In turn, investments should be fuelled by a higher absorption of EU infrastructure funding, as more and more public tenders for highways and railways construction are successfully completed in accordance with EU standards.

New agreement with the IMF would be beneficial

Likewise, Greg Konieczny underlined that a new stand-by agreement would be very beneficial for Romania, HotNews  reports. “This represents a safety net that would protect the country from any growth in international financial risks (which would otherwise bring about a hike in budget co-financing costs); it will ensure the adoption of necessary reforms in key-sectors, including the energy and transportation sectors; the IMF has proven to be an agent of positive change and inspires confidence among investors that the reforms will be fulfilled,” he explained.

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