EU oozes pessimism

The European Commission was quite reserved concerning the evolution of Romanian economy for this year. As compared with the economic data considered by Romanian authorities, the European Commission (EC) is relying on other economic indicators.

The inflation rate taken into account by EC amounts to 37%, against the 25% targeted by the Government. One of the sharpest differences concerns economic growth. While the Government banks on a 4.1% economic leap, EU experts are less optimistic, estimating a mere 1.8% in growth.

When asked why economic previsions issued by the EC were so grim, European commissioner for enlargement issues Gunther Verheugen explained that the Romanian party may not have considered the latest data concerning economic forecasts for the EU member states, which will “undoubtedly impact on the candidate countries’ economies.”

Economic growth in the EU and the United States may be below estimates. Global economic slowdown and potential recession will also have effects in other countries, among which Romania.

Possible failures in the privatisation process, such as Sidex and Banca Agricola (the Agricultural Bank), would be deemed as lack of commitment, according to the EC study, and this is likely to affect the Government’s credibility in this field.

Gunther Verheugen cared to outline that the current Romanian Executive benefits from “the most favourable political environment,” allowing it to perform radical changes in the country. He also warned Romanian officials that this opportunity must not be missed.

This year, Romania might succeed in cutting inflation from 40.7% to 37%, as the central bank aims at achieving stability of the real exchange rate and amassing additional foreign currency reserves.

The budget draft for 2001 was built on an inflation rate of 25%, budgetary deficit of 4% of GDP and an economic growth pace of 4.1%.

However, European Union experts feel that the numerous constraints on the offer and the slow pace of enforcing structural reform will not leave much room for sustained improvement of living standards.

Although fiscal deficit will be confined to 4% of GDP, the increase in payments is threatening the medium-term financial stability, reads the document released by the European Commission.

Moreover, the unemployment rate will remain a major challenge for candidate countries, while higher power prices seem to have triggered only a temporary increase in inflationary pressure.