Romanian economy is getting better

“Although attention now seems to have shifted from external financing constraints to the resumption of economic growth, we believe that Romania’s external accounts position will remain a demanding challenge for any Government coming to power,” shows a release issued by Raiffeisen Bank.

Raiffeisen Bank analysts consider that Romania might experience fiscal sector improvement, as pledges in the agreement concluded with the International Monetary Fund have been met.

Interest rates curbing, meant to reflect a drop in inflation, should lead to lower real interests. Still, it is little likely that the refinancing interest rate should regain an important role as an economy orientation instrument before 2001.

Raiffeisen Bank’s report also notes that Romania is the only country with a transition economy that has a domestic currency/USD exchange rate.

Incertitude generated by upcoming elections, which are supposed to lead to a change in the government’s political colour, dims Romania’s chances of getting a good price for its possible bond issues on international financial markets by the end of this year. Anyway, the gradual improvement of macroeconomic parameters should trigger better conditions for Romania’s attracting foreign financing.

Romania’s economy might witness visible recovery by the end of this year, sustained by increased investments and consumption, amid a gradual drop in interest rates, which will stimulate the financial sector to extend its company crediting activity.

Under these circumstances, Raiffeisen forecasts for the year 2000 a Gross Domestic Product growth rate of 1 percent, while the ascending trend is to get stronger in 2001, when a 2.5 percent increase is projected, while in 2002 the economy will reach an annual expansion pace of 4.5 percent. With the exception of Ukraine and Lithuania, all the other Central and Eastern European countries this year will register over 1% economic growth rates.

The Romanian economy has made considerable progress, resulting in a reduction of the current account deficit from $3.0bn in 1998 to $1.3bn in 1999.