Romania Country Risk Report Q1 2020

Romania Country Risk Report Q1 2020

While moderating, Romania's economy will remain robust over the coming years, suggesting the country will make further progress on its EU convergence story.

Loose monetary and fiscal policies have contributed to the recent strong economic performance, and with inflationary pressures building and the trade deficit rapidly widening, risks to macroeconomic stability have increased.

Meanwhile, the newly formed National Liberal Party government, in the aftermath of the ousting of Social Democratic Party, looks fragile and increases political uncertainty.

While we do not project a major deterioration in the near term, owing to a low starting level of public debt and relatively low borrowing costs, the current trajectory poses mounting challenges for the longer term and alongside a rapidly deteriorating external position, will restrict future flexibility in responding to unexpected shocks.

Key Risks

Persistent political uncertainty and instability may weigh on Romania's long-term growth outlook.

The government's pro-cyclical fiscal loosening and unpredictable short- and medium term budget strategy pose threats to the country's long-term fiscal sustainability.

Romania's external dynamics, namely its widening current account deficit and rising reliance on hot money, expose the country to a higher risk of a sudden capital flight.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Slowing Consumption To Weigh On Romanian Economic Growth
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
External Dynamics Increase Romania's Vulnerability
Outlook On External Position
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
Romanian Base Rate To Remain Constant As External Headwinds Mount
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Romania's Fiscal Deficit To Widen More Than Anticipated
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
RON: Pro-Cyclical Fiscal Policy To Keep Unit Under Pressure For Longer
TABLE: CURRENCY FORECAST
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Contents10-Year Forecast
The Romanian Economy To 2028
Major Untapped Growth Potential
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Romanian Presidential Election Will Boost Liberals' Election Prospects, But Budget Will Face Politic
Long-Term Political Outlook
Progress Ahead Amid Geopolitical Uncertainty
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: FREE TRADE AGREEMENTS
TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISKS
TABLE: WATER RISKS
Global Macro Outlook
Lower Growth, Despite Some Trade Progress
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: ROMANIA – MACROECONOMIC DATA & FORECASTS

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