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| PROSPECTS OF THE ROMANIAN ECONOMY 12/06/2008 |
| (2008-06-12) |
| Last updated: 2008-06-13 16:34 EET |
The European Commission recommended to Romania to consolidate its budgetary and financial policy, so as to keep the budget deficit under the 3% threshold in 2009. The Commission also urges Bucharest to consolidate tax policies and to carry on reforms. According to the National Statistics Institute, the country's trade deficit went up some 15 per cent in the first four months of the year, as against the same period of 2007, amounting to 6.9 billion Euro. The annual inflation rate also reached 8.49 per cent in May, with significant price hikes reported for certain foodstuffs and fuels.
In April the inflation rate was 8.62 per cent, close to the two-year record of 8.63 per cent reached in March. Romania needs economic growth based on productivity, prompted by exports and not consumption, that is, imports. The governor of the National Bank of Romania, Mugur Isarescu, appreciated the growth of the national economy, but he cautioned that, in the first months of 2008, exports increased faster than imports. In his opinion, the economic growth rate will stay high in the second quarter, and it may significantly exceed 6% by the end of 2008, should the agricultural yield be good. But the high growth rate may entail a number of weaknesses, such as difficulties in shifting from an import-generating economy to an export-generating one. Mugur Isarescu:
“I believe we have embarked on the right path, but this doesn’t mean that we have solutions overnight. I think further adjustments are needed, both in terms of policies and economic structure. An economic growth which relies on productivity, a more cautious approach to consumption are still necessary.”
Other weaknesses are related to the Romanian banks' dependence on foreign funding, to the threat of a real estate bubble and to the risk of over-optimistic views on economic developments. In his turn, finance minister, Varujan Vosganian voiced his satisfaction with the positive results in the first quarter of the year, when the industrial output picked up more than 7 per cent, investments rose by over 35%, and Romania's foreign position improved significantly. Varujan Vosganian:
“The conclusion is that Romania disproved those ratings according to which our country is a high-risk economy and one with a large number of weaknesses. I can safely state that none of the threats forecast in September, October and November deepened or turned into long-term vulnerability.”
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