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Romania: Country Economic Forecast: 23 Feb 2012

7 Pages Oxford Economics February 23, 2012 SKU: OFE3790003

GDP contracted by 0.2% on the quarter in Q4 last year, resulting in growth of 2.8% in 2011 as a whole, broadly in line with what we expected. But looking ahead, we have cut our growth forecasts due to adverse developments in the banking system stemming from the Eurozone crisis. GDP is now expected to grow by 1% in 2012 and 2% in 2013. Progress in the fiscal arena is encouraging, and the EU and IMF have made available another tranche of precautionary funds. On the structural side, there are plans in place to sell a 15% stake of state-owned power grid operator Transelectrica in March. This is crucial in setting the trend of privatisation of other state-owned enterprises. However, fiscal and structural reforms have led to violent street protests, causing Prime Minister Emil Boc to step down. The president has nominated a caretaker premier, until the general elections in November, who has agreed to adhere to the EU/IMF targets, but the future of economic policy is uncertain once the new government is elected in November. With nearly a fifth of its banking sector owned by Greek institutions and close trade linkages with several Eurozone countries, Romania's banking system and exports are under severe threat from the ongoing debt crisis. Although the deal finalised for Greece provides temporary relief, the crisis is far from over; downside risks dominate the outlook.

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Romania: Country Economic Forecast: 23 Feb 2012

Oxford Economics
February 23, 2012

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