Tuesday, August 5, 2008

Romania's economic growth exceeds expectations


Despite turmoil shaking the international market, Romania experienced four times higher economic growth than the average EU country in the first quarter of this year.

By Paul Ciocoiu for Southeast European Times in Bucharest

The Romanian economy grew by 8.2% in the first quarter of 2008, its biggest jump since 1990 for that quarter, according to the National Statistics Institute. GDP for the first quarter was 23.5 billion euros. In comparison, EU countries' average economic growth was roughly 2.4% for the same period, according to Eurostat.

This ranks among the top five quarters recorded by Romania since 1990, according to Ziarul Financiar. GDP enjoyed 8.3% growth in the third quarter of 2006.

The National Prognosis Commission (CNP) estimates that Romania's economic growth will rise above the annual 5% threshold until 2020, with GDP reaching 442.3 billion euros. However, the CNP predicts that the growth will drop to 6.5% by the end of this year and will exceed 6% only in 2009.

Romania's economic growth could exceed 6% in 2008 if there is good agricultural output, said Mugur Isarescu, the governor of the National Bank of Romania, explaining that the production could add up to 1 billion euros, or 1% of GDP. Economics Minister Varujan Vosganian also voiced optimism, saying growth could continue in the second quarter and reach the 8% threshold.

The average monthly salary will rise by 166% until 2020 to 1,133 euros, compared to the current 425 euros, according to the CNP. Unemployment will stay at the level registered last year, 4.1%.

Analysts predict that the sunny economic outlook will affect national currency growth and encourage more foreign investment. According to a recent joint poll by the Thomson Reuters Agency and Austrian Oesterreichische Kontrollbank, Romania's business environment is one of the most attractive in Central and Eastern Europe, a region which will see foreign investments topping 100 billion euros in 2008. A survey by Mergermarket found private-equity experts predicting that "emerging Europe" -- with Poland and Romania at the forefront -- would top Asia, Russia and South America in attracting Western investment.

According to Eurostat, Romania ranked 15th on the list of Foreign Direct Investment recipients last year, with 7.3 billion euros. According to the Romanian Agency for Foreign Investments, the French carmaker Renault was Romania's number-one foreign investor in 2007, at over 670m euros.

Optimistic figures aside, the European Commission has recently urged Romania to accelerate structural reforms and fiscal consolidation. The EC warned that the nominal budget deficit could reach 2.9% in 2008, an increase from last year's 2.5%.

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