2013-01-01 02:04:53 - Romania Business Forecast Report Q4 2012 - a new country guide report on companiesandmarkets.com

Romania´s return to positive growth territory in Q212 does not point to a strong economic recovery over the next few quarters. We expect economic activity has already slowed in the stages of H212 and see little to support strong growth in 2013. Political risks have increased since our last quarterly update, and we expect relations between Prime Minister Victor Ponta and President Traian Băsescu to remain strained. With inflation now moderating substantially, we see scope for the National Bank of Romania to loosen monetary policy in the months ahead. We forecast the benchmark policy rate to reach 5.00% by end-2012 (from 5.25% currently), as growth concerns from increasing global headwinds take hold. We see growing risks to Romania´s ability to

 

 

finance its structural current account deficit over the next few years owing to strained relations with the EU-IMF and a weaker outlook for fixed investment inflows.

Major Forecast Changes

We have revised down our 2012 real GDP growth forecast to 0.5%, from a previous forecast of 1.0%. Underpinning this revision is a deteriorating outlook for Romanian exports on the back of the eurozone recession, and heightened political risks that will dampen investment. We have adjusted our 2012 current account deficit forecast from 4.7% of GDP to 3.8% owing to improved services exports. However, we still believe the risks of financing this deficit are elevated.

Key Risks To Outlook

Downside Risk To Growth Forecast: The eurozone sovereign debt crisis presents a substantial risk to global and thereby Romanian economic growth. Although our core scenario is for policymakers to reluctantly take the action necessary to contain the crisis, the risk of a disorderly outcome exists; this could catalyse a renewed global downturn. Romania would be extremely vulnerable under such a scenario.

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