Romanian economy fared better in 2012 than expected

Romanian economy fared better in 2012 than expected


By Daniel Stroe – Bucharest

Romania had last year an economic growth of 0.7 per cent, a little more than the 0,3 per cent growth initially announced, the National Statistics Institute said this morning. The modification comes after figures showing industry and the retail did better in 2012 than previously estimated, officials explained.

Thus, Romania’s GDP last year amounted to 587,4 billion lei (about 133 billion Euros). A 1 to 1,4 per cent growth is forecasted for 2013 by private companies, while the National Prognosis Commission expects a 2 per cent growth this year, followed by a 2,5 and, respectively, 3,3 per cent growth in 2014 and 2015.

Embarked on an upwards economic trend, Romania hopes to lose the junk status at Standard&Poor’s after five years in a row, a push that has the support of analysts from London to Los Angeles, according to Bloomberg. In a press conference this week, Economy minister, Varujan Vosganian, called on the rating agencies to upgrade the country’s sovereign rating.

Moody’s is the only agency that kept Romania in the category of countries with an investment recommended rating amid the economic crisis, rating it Baa3, with a negative outlook. Fitch rates Romania BBB, with a stable outlook, the company’s lowest investment rate, while Standard&Poor’s rates Romania BB+, the highest level in the junk section, with a stable outlook.

Romania took up one of the EU’s toughest austerity measured mid 2010, which saw a 25 percent cut in state employees’ wages and a 5 percentage-point increase in the value-added tax. At the same time, the successive democrat-liberal and now social-liberal governments, which arranged two 20 billion Euros worth loans from the International Monetary Fund and the EU, managed to bring the budget deficit  to 2.5 percent of the GDP last year from 7.2 percent in 2009. Romania is now negotiating a precautionary loan agreement with IMF which could enhance the chances of an upgraded rating.

But the foreign investors’ confidence is also strictly related to the country’s home politics, many analysts have warned. After last years’ political turmoil in Bucharest when President Traian Basescu was easily impeached by the new majority in power, a move accompanied by controversial changes in legislation which trimmed the powers of the country’s highest court to the dismay of EU, Romania is closely monitored by outsiders.

A troublesome political cohabitation between Basescu, whose second term finishes late next year, and the ruling social-liberal coalition, the same which sought to remove the president from the post, will likely continue to raise eyebrows in the West.