Tuesday, February 17, 2009

Romania 2009 FDI may fall by a third-finmin

BUCHAREST, Feb 17 (Reuters) - Romania's foreign direct investment flows may fall by a third this year, finance minister Gheorghe Pogea warned on Tuesday, adding to concerns about future access to cash needed to finance economic imbalances.

"I think in 2009 it is possible they (FDI) will be over 6 billion euros," Pogea told reporters on the sidelines of a parliament session to debate the 2009 budget draft.

But economists said Pogea's forecast of FDI slowing to over 6 billion euros ($7.59 billion) from last year's 9.2 billion could be optimistic, raising the spectre of a deeper slowdown in inflows that may threaten to destabilise the emerging economy.

"In the current context of deepening recession in the euro zone, I don't see how is it possible to attract 6 billion euros," said Nicolaie Alexandru-Chidesciuc of ING Bank in Bucharest.

Many analysts see Romania as one of Europe's most vulnerable economies because of its heavy dependence on foreign cash to plug a wide trade deficit driven by rampant consumption in recent years.

The external shortfall is widely expected to narrow down to some 10 percent of GDP this year from roughly 12 percent in 2008 but some warn Romania's potential inability to finance the gap could spark a run on the leu currency.

One way for Romania to boost foreign cash flows would be to ramp up absorption of EU funds, which has been slow since the country's accession to the bloc two years ago.

Pogea's centre-left government pledges to speed up the process but administrative failings mean progress could be slow.

"Probably (Pogea's) estimate is based on EU funds inflows ... but what we've been attracting in the past two years was insignificant," said Chidesciuc.

"I wouldn't count on attracting more that 3.5 billion euros worth of FDI overall this year."

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