Stable economic prospects

Daniela Budu, 18.03.2019, 13:46

The Standard & Poor’s (S&P) financial
rating agency has reconfirmed the rating related to Romania’s government debt
to BBB-/A-3 for the long and short term debt in local and hard currency as well
as the stable outlook. Also S&P estimates that Romania’s economy will slow
down even more this year, to stand at 3.5%, due to a more reduced external
demand and a lower level of private investments. According to the agency, last
year the growth rate of the GDP dropped down to 4.1% from the very high level
of 7% reported in 2017, when the fiscal stimulation measures and the favourable
external environment prompted Romania’s economic boom. For the period
2020-2022, S&P expects a moderate growth towards a more sustainable level
of 3% annually. The future growth trajectory will depend on the progress made
in passing institutional reforms and on the rate of success of increased
domestic investments, for instance by means of boosting the absorption of
European funds, S&P also shows. In another move, S&P remarks an obvious
propensity for immigration among young people, among the educated labour force
as well as a gloomy prospect on the improvement of general life conditions. S&P
warns that if the authorities don’t take action to bring the people in the
Diaspora back home, they will not be able to ensure a more robust growth
trajectory for the economy and a sustainable way of managing the dynamics of
the population’s rapid aging.

The agency also draws attention to
the increasing fiscal pressure that will linger in the absence of corrective
measures. The current account deficit will probably grow at almost 5% of the
GDP, S&P writes. The national bank of Romania still enjoys a high
credibility rate and the awaited amendments to the new banking tax will probably
ensure the policies’ efficiency. S&P estimates that the general
governmental deficit will deepen, going up to 3.3% to 3.5% of the GDP in 2019
and 2020 respectively, as a result of a slowdown in economic growth and of
government expenses, and against the backdrop of preparations for the 2019
presidential election and the 2020 parliamentary elections. S&P’s decision
to maintain the stable outlook for Romania is a fair one, which acknowledges
and confirms the current economic realities of Romania, says Finance Minister
Eugen Teodorovici. According to the finance ministry officials, Romania’s
strengths underlying the S&P decision are the moderate level of public and
foreign debt and the effort to maintain the economic growth prospects. The 2019
budget law passed by the Romanian government and promulgated by president Klaus
Iohannis is based on an economic growth of 5.5%, a 2.7% deficit and a GDP of
almost 200 billion Euros.