Country Report Romania September 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.
• However, 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 social unrest as austerity bites and unemployment grows.
• The IMF will now allow a consolidated budget deficit target of up to 7.3% of GDP in 2009 (compared with 4.6% of GDP previously), based on much bleaker assumptions about economic growth and revenue intake.
• After steep GDP contractions in the first and second quarters, the Economist Intelligence Unit has revised down its real GDP forecast for 2009, and we now expect the economy to shrink by 7.5%. We forecast growth of 1% in 2010.
• Average consumer price inflation is forecast to fall gradually, from 7.8% in 2008 to 5% in 2009 and to 3.3% in 2010.
• After reaching 12.4% of GDP in 2008, the current-account deficit is expected to contract sharply, to an average of around 5% of GDP in 2009-10.

Monthly review

• The presidential election is to be held on November 22nd 2009, with opinion polls placing the incumbent ahead, although support for him may be waning.
• Planned cuts in public-sector wages and the introduction of a unitary salary law have been met with trade union protests, and run the risk of provoking unrest once they are implemented.
• A third revision of the consolidated government budget at the end of August increased the planned deficit for 2009, from a previous target of 4.6% of GDP to 7.3% of GDP.
• Real GDP fell by 8.7% year on year (unadjusted) in the second quarter of 2009, and by 1.1% quarter on quarter, as a result of which real GDP declined by 7.6% year on year in the first half.
• In January-July the current-account deficit was ???2.7bn (US$3.7bn), down 74% year on year, as the trade gap shrank by almost 70% on the year-earlier period.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48
NAICS Code: 517