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| SPRING ECONOMIC FORECASTS 22/04/2008 |
| (2008-04-22) |
| Last updated: 2008-04-23 14:18 EET |
Banking experts are optimistic about Romania’s economic growth prospects. BRD Groupe Societe Generale on Monday released its spring report on the macroeconomic prospects in Romania. According to the document, Bucharest will witness an economic growth rate of over six per cent in the forthcoming period. For this year, we are even to expect a 6.6 per cent rate. The forecast is based on the upturn in the farming sector and the fading effects of a bad agricultural year. The currency exchange rate will reach 3.4 lei for the Euro by the end of the year, and the inflation rate 7 per cent. The most pessimistic BRD forecast refers to the current account deficit, which go up to 15 per cent in late 2008, and approximately 16 per cent in the next two years.
Business analyst Liviu Voinea disagrees with these forecasts, after early this year both authorities and bankers were rather sceptical as regards the Romanian economy in 2008. Liviu Voinea:
“A 7 per cent inflation rate and a 3.4 exchange rate at year end can't be right. A 7 per cent inflation rate would exceed the central bank target, whereas the 3.4 currency exchange rate would be within the estimates of the National Forecast Commission. But a good currency exchange rate means a depreciation as against the past few months, and it would take the inflation rate much below than 7 per cent. As for the farming sector, a good agricultural year is hard to predict, even in March, because there are no investments in farming infrastructure. Agriculture only accounts for 11-12 per cent of the GDP. We should not ignore the fact that most of the farm products sold in Romania are imported. So unfortunately, whether the agricultural year is good or bad no longer makes much of a difference.”
BRD analysts also expect a slight decrease in the growth rate in the building sector. However, the Romanian Minister of Economy Varujan Vosganian believes the industry will continue to develop at a high rate, and that real estate prices may become stable as of next year. Varujan Vosganian:
“Some argue that this market will become more stable. Those who say that are the investors in this market, who got used to investing one leu and gaining two. As regards the industry’s growth rate, there are no signs that it is dwindling. Prices might even begin to decrease, gradually, starting at the end of this year or early next year.”
International financial agencies regard the Eastern European states as the emergent markets the most vulnerable to a rise in crediting. Standard&Poor's mentions Romania as an example, alongside Island, Lebanon, Latvia and Turkey. At the same time, the International Monetary Fund announced that Eastern European governments must take steps to slow down the domestic demand and address economic imbalances, so as to counter the effects of the rising food prices and the growing inflation rate.
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