Romania Country Report

Published by: Internet Securities, Inc. (Intellinews)

Published: Mar. 10, 2008 - 14 Pages

Table of Contents

The GDP increased above expectations by 6.6% y/y in Q4 last year accelerating from 5.6-5.7% y/y in Q2-Q3. Full data is not available yet, but there are evidences that the economic rebound is driven by improved performance in the manufacturing sector. The full-year growth is booked at 6% and marks significant deceleration from 7.7% in 2006 but this is mainly due to adverse shocks in the farming sector.
The intense M&A activity and the expected privatisation of the car plant in Craiova add more optimism to the general picture. The lagged effects of the local currency’s depreciation are expected to surface in different ways ranging from improved external competitiveness to more appropriate pricing of domestic assets. Investment funds, including private equity firms, have warned about inflated prices of local assets that are partly corrected now by exchange rate parities.
The main risks for the country are linked to fiscal unpredictability and political rifts. The government promised to cut the budget deficit to 2.3% of GDP, but this is largely a result of inflation tax effects on budget revenues while public spending for social assistance and wages remains quite generous. The fiscal stance is separately endangered by frequent political tensions and social expenditure sentiments before the parliamentary elections due to take place this fall or early next year.

Abstract

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