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EIU’s Lambertson: We don’t expect political situation in Bucharest to impact current robust level of economic growth

The political situation in Romania won’t have a significant impact over the robust level of current economic growth that could reach a peak in 2017 and may slow down in 2018, analyst at The Economist Intelligence Unit Maximilien Lambertson tells AGERPRES.

“The PSD’s move to replace Grindeanu will refocus attention on the government’s competency and effectiveness, particularly regarding the sustainability of its pro-cyclical fiscal policies and attempts to decriminalise certain corruption offences. While it is certainly shocking for a governing party to replace its prime minister barely six months in its tenure, Romanian firms, consumers and investors have been primed for this type of political instability since the mass protests broke out in February. Supporting this view, Romanian sovereign credit default swap rates, while higher than September 2016, remain far below pre-2015 levels. For these reasons, we do not expect a significant impact on the current robust level of economic growth, which we expect to peak this year and slow in 2018, mainly due to the economy running into capacity constraints,” said Maximilien Lambertson.

He stated that Romania’s economy is to increase in 2017 by 4.2 percent and by 3.6 percent in 2018.

He said the leu currency slightly depreciated against the euro Thursday, amid the news that came out of the Government. Lambertson added that moderate depreciations this year are to be expected due to the uncertainty surrounding fiscal policy and the deepening of the current account deficit to meet the expanding domestic demand, but the leu is expected to probably appreciate more than the euro, rather than a sharp decline driven by the political risk.

The Social Democratic Party (PSD) and the Alliance of Liberals and Democrats (ALDE) decided on Wednesday to withdraw political support for Sorin Grindeanu’s Government claiming poor governmental performance, a decision that led to the ministers tendering their resignations to the Secretariat General of the Government on Thursday. Prime Minister Sorin Grindeanu announced that he will step down after PSD leader Liviu Dragnea resigns.

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