Wednesday, May 30, 2007

Isarescu: Romania may adopt the EUR before 2014

"Romania may adopt the European currency earlier than scheduled (2014), if things go well, National Bank of Romania (BNR) Governor Mugur Isarescu stated in a workshop on economic topics. “We have presented this programme in Brussels, with the option that, if things go well, we may be more ambitious,” Isarescu said, quoted by Mediafax. He pointed out that structural reforms must be finalised, as well as the pension and healthcare reforms, and the infrastructure must be built.

According to the Governor, the budget deficit and current account deficit are two of the major issues Romania is facing in the Euro zone accession process. Also, Isarescu emphasised that the foreign imbalance must be settled through a productivity increase. “Over the past few years, most of the deficit has been covered by FDI. Romania has been discovered, and considering the current data, investments will be carried on in the future as well,” Isarescu said. The budget deficit targeted by Romanian authorities is 2.8 per cent of GDP for this year, but according to the European methodology the value is 3.2 per cent of GDP, over the 3 per cent ceiling set for the adoption of the European single currency.

In fact, National Bank of Austria Governor Klaus Liebscher, a member of the European Central Bank Board and representing Austria in the International Monetary Fund Board, also believes that deadlines proposed by Mugur Isarescu for adoption of the Euro by Romania are realistic.

As for the inflation, according to the Governor the disinflation trend will be levelled down, as Romania is getting close to the European Union price increase rate. “Price corrections are still to be made, e.g. for natural gas. There is a dispute about what is going on with the gas price in the domestic market,” Isarescu explained. The average inflation targeted for the year is four per cent, as against 6.56 per cent last year, and the rate estimated for year-end is around 3.7-3.8 per cent, Isarescu mentioned.

“I hope that, without major political errors, the economic growth will continue after 2010 as well,” Isarescu stated. Romania has seen about eight years of continuing economic growth, the central bank chief explained. The economic growth rate last year was 7.7 per cent, up from 4.1 per cent in 2005, when the agricultural yield was affected by floods.

Official forecast indicate a 6.5 per cent growth rate this year, 6.3 per cent in 2008 and a gradual slow-down until 2013, when the economic growth rate is expected to reach 5.7 per cent. Romania has reported economic growth since 2000, after a three-year recession spell.

The rating assigned to Romania by international agencies will not decrease below the investment-grade category, which tells investors that risks are low, Mugur Isarescu also stated. He added that two matters have been definitively settled as far as the economic environment is concerned: one related to the low-risk rating, and the other to increasing currency reserves, which improved the country’s financial credibility at an international level. “Romania was affected several years by the shortage of reserves. Loans were limited and costly,” Isarescu explained.

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