NBR: No risk of a hard landing for the economy

There is no risk of an abrupt economic slowdown in Romania, even if the effects of five consecutive increases in the monetary policy interest rate (2.75% in total) were fully felt, according to Cristian Popa (photo), vice-governor of the NBR (National Bank of Romania). Popa was commenting on the EBRD’s decision to adjust Romania’s 2008 growth forecast by 1.5% (from 6.5% to 5%) amid the tightening of the central bank’s monetary policy, after the bank increased the interest rate to rein in inflation. The financial institution has downgraded its outlook for Romania, Ukraine and Kazakhstan – three important countries for investors interested in developing markets, after difficulties prompted by the tightening of global lending conditions and by inflation. “The EBRD does not consider there is any risk of a hard landing, this is just a reviewed economic growth forecast, given the strengthened economic policies, particularly the monetary policy. A slowdown from 6.5% to 5% is not a hard landing. At the NBR, we anticipate an economic increase from 5% to approximately 6% over the next two years, which would be more in line with the potential GDP,” Popa told a conference organised yesterday at the EBRD’s annual meeting. He added the RON had come out of a period of extremely high exchange rate volatility, having reached a stable margin of 3.5 to 3.7 RON per euro. Given the positive forecasts for agriculture this year, and the economic growth in Q1, the vice-governor believes the overall growth rate could exceed expectations, and go against the EBRD’s initial forecast.