In Q1, the domestic economic growth was four times higher than the EU average.
Despite the turbulence on international markets, in Q1, Romania’s economic growth was four times higher than the EU average, according to the Southeast European Times portal, quoted by Agerpres. The Romanian economy grew by 8.2 per cent in Q1 2008, being the highest jump in the first quarter ever since 1990, according to the National Statistical Institute. The GDP in Q1 was EUR 23.5 bln. By comparison, the average economic growth in the EU was by 2.4 per cent in the same period, according to Eurostat.
The National Prognosis Commission (CNP) forecast that economic growth in Romania would exceed the five per cent annual threshold by 2020, and that the GDP will be EUR 442.3 bln. However, CNP expects the growth of the economy to drop to 6.5 per cent at the end of 2008 and to exceed 6 per cent only in 2009.
Economic growth in Romania may exceed six per cent in 2008 if the agricultural production was good, said central Bank (BNR) Governor Mugur Isarescu. He explained that agricultural production might be EUR 1 bln or one of cent of the GDP. Economy Minister Varujan Vosganian was also optimistic, saying that the growth might continue in Q2 and reach 8 per cent.
AOAR: Economic growth is not a threat
The President of the Businessmen’s Association (AOAR), Florin Pogonaru, and the CEO of Aviva Pensii Private, Eugen Voicu, told The Money Channel that Romania was on the right way from that point of view. ‘I believe we are on the right way and a steady way, too. I am not that scared by macroeconomic figures. Of course, such an inflation arte is not desirable and I can see that we are falling behind our commitments. But let us not forget that this is a time of economic growth on a medium term, I would say, because investment in Romania will continue,’ Aviva Pensii Private CEO Eugen Voicu stated. ‘I also think Romania is on a curve of potential growth with this seven per cent and, again, we should stop judging the economy as such, let’s judge the economy within the on-going convergence process,’ said AOAR President Florin Pogonaru.
Biggest retail growth
In June, Romania also registered the highest retail growth in the European Union both compared to May (4.1 per cent) and compared to the similar period in 2007 (23.3 per cent), a lot higher than the EU average. The 23.3 per cent rise registered by the Romanian retail is 21 times higher than the EU 27 average of 1.1 per cent, and the monthly rise is 4.1 times higher than the one per cent growth arte registered in the EU 27, with the main threats for the Romanian economy remaining inflation and deepening current account deficit. The annual rise of retail in Romania in June was over four times bigger than the 5.7 per cent growth rate reported by the second-ranked country – Slovenia. Updated every month, the 4.1 per cent growth rate is 2.4 times higher than the 1.7 per cent growth rate reported in Sweden.
The most important retail drops in June compared to June 2007 were registered in Latvia (- 8.3 per cent), Spain (- 7.7 per cent) and Estonia (- 7.2 per cent).
The Statistical Office of the European Commission notes there was no data available for Italy and Malta, and that data supplied by The Czech Republic, Ireland, The Hellenic Republic, Cyprus, Hungary and The Netherlands are confidential and cannot be published individually.
Predictions for Romanian economy
Nine O’Clock – May 6,2008
by Anca Bernovici
Bucharest – The National Bank of Romania (BNR) will keep a monetary policy interest rate of 9.5 per cent, and the rate of inflation could fall to under 8.5 per cent in April, according to a report drafted by analysts with the Romania Commercial Bank (BCR) made public on Monday. However, the central bank may toughen its monetary policy by making foreign loans requirements more difficult according to the report. BNR is to take yet another decision at today’s meeting over the monetary policy interest rate. The foreign direct investments (FDI) may reach EUR 7.8 bln this year, thanks to more industrial investments and finished privatizations, according to the same report, which shows that foreign companies see Romania as having a significant business potential. BCR experts say this potential is outlined by a 40 per cent growth of dividend flows between 2005 and 2007. During 2002-2004, dividends totalled EUR 1.9 bln, and jumped to EUR 10.3 bln during 2005-2007.
The volume of exports has risen too on the back of a higher industrial production in February, and the indirect tax revenues collected into the general consolidated budget went up 80.3 per cent in the first quarter, which could substantially boost economic growth.
The annual rate of inflation could drop to under 8.5 per cent, due to the April appreciation of the RON and a positive trend of administered prices. Exchange rate fluctuations had been significant during April, according to the BCR report, caused by a locally-induced major appreciation before Easter – sales by economic operators of hard currency aimed at paying state taxes and remittances from Romanian workers abroad – but also a strong correction caused by international factors, among others, late that month. BCR may keep the monetary policy interest steady at 9.5 per cent, BCR analysts say, who does not rule out a more restrictive monetary policy through certain measures aimed at discouraging the borrowing of foreign loans.
On the other hand, analysts with the Unicredit Group believe that Romania will witness a slowdown in economic growth to 4.7 per cent in 2010, and kept their previous predictions over a rise in the Gross Domestic Product (GDP) to 5.5 per cent and 5 per cent in 2008 and 2009 respectively.
A Unicredit analysis for several Central and Eastern European states and the euro zone anticipates Romania’s GDP will surge 6.5 per cent this year, 6.1 per cent in 2009 and 5.8 per cent in 2010.
On the average inflation for the interval 20078-2010, experts prognosticate inflation to go down to 3.8 per cent in 2010, from this year’s forecast of 7.4 per cent.
Unicredit analysts are of the view that the current account deficit will grow to 14.2 per cent GDP this year, from 13.9 per cent GDP in 2007. Years 2009 and 2010 may see the deficit going down to 13.5 per cent GDP and 12.8 per cent GDP. The foreign direct investments (FDI) will follow a descending trend to 3.55, compared to 4.5 per cent this year.
Unicredit analysts say that BNR might increase the monetary policy interest rate by another 0.5 per cent, to 10 per cent. Also, economists forecast that the central bank would cut the interest rate by 1 per cent next year, and to 7.75 per cent in 2010. The crediting rate will go down from 35 per cent this year to 17 per cent in 2010. Deposits will see a similar trend, down, from 26 per cent this year to 14.5 per cent in 2010.