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Romanian report Romanian report
by Euro Reporter
2011-10-10 07:10:40
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Economic growth expectations for 2012 under pressure

The IMF projects a positive outlook of the Romanian economy in 2012, according to the second review that an IMF team took following recent discussion with the Romanian authorities. The economic growth for this year will reach 1.5 percent, initially led by exports, but with domestic demand picking up in the second half of this year. This is attributable to a good agricultural output and a recovery in the labour market. The initial growth rate of 3.5 - 4 percent will be slashed, according to Jeffrey Franks, head of the Romanian IMF mission. Franks declared for Mediafax newswire that Romania will register a 2 percent increase, as the risk of contagion from EU markets becomes more prominent.

Wolfgang Schoiswohl, Vice-President of Corporate Banking at BCR is also expecting the Romanian economy to grow by 2 to 3 percent of GDP, but the international context may downgrade this rate.  Last week, Vladimir Kalinov, vice-president for the retail division of Raiffeisen Bank, said that Romania's economic growth will pass the 1 percent threshold next year, according to the latest forecast.

Cristian Nacu, partner of Enterprise Investors, with significant investments in Macon Deva, Siveco and Profi, believes that the Romanian economy is fully dependant on the international context, as exports were the main growth engine. However, Nacu praised Romania's fiscal reforms that were implemented with "a lot of force and courage". "Entrepreneurship is the solution for the growth in the medium and long term. We have to encourage small entrepreneurs", Nacu said this week, when the 5th edition of "Champions in Business", a competition awarding the most dynamic entrepreneurs in Romania, was launched. 


on track to meet 2011 deficit target

Romania is on track to meet a budget deficit target of 4.4 percent of gross domestic product this year, though volatile markets will hit its economic growth in 2012, its prime minister said on Wednesday. Romania has agreed the target with international lenders including the International Monetary Fund under the terms of a 5.4 billion euro aid deal, funds it will draw on only if it needs them. "In 2011, we are on course to achieve the agreed targets, of economic growth of 1.5 percent and to reach a budget deficit of 4.4 percent," state news agency Agerpres quoted Emil Boc as saying in the city of Ploiesti.

"Unfortunately, the growth forecast for 2012 is negatively affected due to turbulence and uncertainty on European and world markets." Romania has completed a 20 billion euro IMF-led bailout and the government forecasts its economy, slowly recovering from a deep recession, would grow by 3.5-4 percent next year. Romania central bank governor Mugur Isarescu said on Wednesday that Romania's annual inflation will be within the central bank's 2-4 percent target in September. Romania's annual inflation slowed to 4.3 percent in August due to a steep fall in food prices and weak domestic demand. Annual inflation quickened to more than 8 percent earlier this year.

In Washington, the IMF said in a statement on Wednesday that headline inflation in Romania was expected to recede to around 5 percent by the end of 2011 due to better year-on-year comparisons following a July 2010 increase in value-added tax. While high food and energy prices triggered inflation consultations with the IMF, the Fund said the danger of breaching limits in future reviews had eased. For 2012, these supply shocks are expected to abate, causing inflation to trend back down toward the central bank's 3 percent target, the IMF said.


Schengen accession delayed indefinitely

The decision regarding Romania and Bulgaria’s accession to the Schengen area has been put back to an unspecified date, after Poland, which currently holds the EU presidency, did not submit the move for a voting session by the Directorate-General for Justice and Home Affairs of the European Union, because of opposition from the Netherlands and Finland last month.

Locally, the decision met a mixed response. The Romanian-Dutch Chamber of Commerce voiced its support for Romania’s accession to the Schengen zone. Ben Jager, executive president of the Dutch Romanian Network and Honorary Consul General of Romania, said, “We would like to ask all involved members of the government(s) to break the deadlock in the negotiations. We propose a more pragmatic path. In this matter we would like to draw attention to the compromise of Germany and France, which proposed a two-step scenario.”

Adding his view, Peter de Ruiter, head of the Romanian-Dutch Chamber of Commerce, said “Romania’s Schengen accession would be beneficial for the free movement of both people and goods. It will help intra-community trade and could stimulate Romania’s attractiveness to foreign direct investment in sectors such as manufacturing, assemblage, transport and logistics. The Netherlands already is the largest foreign investor in Romania and we believe Romania’s accession to Schengen would also be in the interest of the Dutch business community, leading to stronger commercial exchange between the two countries.”

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