EBRD Forecasts 4% Growth For Romania In 2009

The European Bank for Reconstruction and Development (EBRD) has lowered the Y2009 economic growth forecast for Romania from 5% to 4%. EBRD analysts commented that the short-term outlook for the Romanian economy was uncertain, but indicators looked promising on long-term. Romania has the potential to act as an important regional hub and take advantage of the substantial EU funding to be made available in the next few years. In their opinion, the main macro-economic challenge on short term will be to manage the inevitable economic decline. Fiscal discipline will be vital, considering that the Government is trying to establish confidence and closely monitor budget revenues. Although the economy is growing fast, there are signs of overheating: the inflation target is overshot and the current account deficit is deep, although more stable than before, EBRD warned. Governmental spending should be kept under control for a better optimization of the macro-economic policy mix. Pressures from the European market have intensified, especially for small- and medium-sized enterprises, EBRD analysts wrote. They claim that the challenge for Romania is to attract capital and have a more flexible labor market, in order to reduce the pressure on salaries. The EBRD report explains that the human capital development should be done through better education, and also by convincing Romanians gone to work abroad to return home.

The quality of infrastructure is below the EU average, and the need for investment remains huge. On the bright side, the 4.6 billion EUR that Romania can access from EU funds should be sufficient for covering this need, EBRD estimates.