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| RISKS FOR THE ROMANIAN ECONOMY 12/09/08 |
| (2008-09-12) |
| Last updated: 2008-09-15 14:58 EET |
The growing dependence on foreign capital, increasing interest rates, depreciation of the national currency and the pro-cyclic economic policy are the main threats for the Romanian economy, whose strengths, on the other hand, are the European Union membership, high foreign direct investments and low public debt.
Analysts with the business services provider Coface Romania note that the pro-cyclic economic policy has contributed to the deepening of the current account deficit and the rise in prices, while the increase of interest rates and the depreciation of the national currency will affect the budgets of both companies and households. Another weakness is related to the political tensions in the context of a minority government. And, analysts add, with general elections drawing near, reform is by no means encouraged.
On the other hand, experts with the National Bank of Romania expect the new central bank regulations on household loans to slow down the increase in loan granting by over 10 per cent by the end of the year. They argue that the new regulations will not make loans more expensive, but will introduce safeguards, precisely because debt rates for consumers in general have increased significantly.
According to the latest data, although the debt rate decreased in July, Romanians still had overdue loan payments of close to half a billion euros. The latest report issued Thursday by the National Statistics Institute points to a 9.3 per cent economic growth rate in the second quarter of the year, and an 8.8 per cent rate for the first half of the year, which are record-high levels since 1989. President of the Institute, Vergil Voineagu, has details on the contribution of each sector to this increase:
“Services accounted for 3.8 per cent of the overall increase of the GDP, the building industry contributed 2.2 per cent, accounting for 25 per cent of the GDP increase. Industry developed spectacularly, to account for 18.2 per cent of the total GDP increase.”
Record-high values are also expected for direct foreign investments, which exceeded 4.7 billion euro in mid-2008. Head of the Applied Economics Groups, Liviu Voinea, concludes:
“We have a record growth rate, which happens every four years. Four years ago, again in an election year, we have an over 8 per cent increase of GDP. We also have a high inflation rate, and the economic growth continues to be based on consumption, because construction and services are elements of household consumption, rather than corporate consumption.”
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