Country Report Romania May 2009

Outlook for 2009-10

• The government, comprising the Democratic Liberal Party (DLP) and the Social Democratic Party (SDP), has a large majority, which should enable the cabinet to pursue its agenda unimpeded by the parliamentary opposition.
• The potential for intra-government conflict is great, given likely differences between the DLP and the SDP over economic policy and judicial reform.
• The government's pursuit of fiscal retrenchment under an IMF-funded programme will bring it into opposition with the unions, and there is a risk of widespread social unrest as austerity bites and unemployment grows.
• The IMF has agreed a revised consolidated budget deficit target of 4.6% of GDP in 2009 (compared with 2% of GDP previously), based on much bleaker assumptions about economic growth and revenue intake in 2009.
• Following real GDP growth of 7.1% in 2008, the Economist Intelligence Unit forecasts an economic contraction of 2.8% in 2009. A rebound, to growth of 1.8%, is forecast in 2010.
• Average consumer price inflation is forecast to fall gradually, from 7.8% in 2008 to 5.4% in 2009 and 4.2% in 2010.
• After reaching an estimated 12.4% of GDP in 2008, the current-account deficit is expected to contract sharply in 2009-10.

Monthly review

• EU officials have expressed concern at proposals by the Romanian government to extend Romanian citizenship to up to around 1m Moldovans.
• Poll results suggested that the current president, Traian Basescu, is the most likely candidate to win the next presidential election.
• The consolidated budget deficit amounted to Lei7.9bn (US$2.4bn) in the first quarter of 2009, equivalent to 1.5% of forecast annual GDP.
• There were no signs of any relaxation of conditions in the credit market inMarch.
• The monthly rate of inflation moderated to 0.5% in March, bringing the year-on-year rate down to 6.7%, from 6.9% in February.
• The latest data for industrial output and construction provide no firm evidence that "green shoots" have appeared in the Romanian economy.
• A 60% annual contraction of the merchandise trade deficit, to 961m (US$1.3bn), in the first two months contributed to a 76% year-on-year decline in the current-account deficit.

Source: Country Report

This report covers the following industry codes:
SIC Code: 53;59
NAICS Code: 44