Romanian Economy Ready To Start Anew - Ctrl Bk Head

Speaking at the Gulf Cooperation economic council in Bucharest, Isarescu said the new growth cycle should rely on both local production and exports.

"This would translate into a sustainable, financeable external deficit and will help us exit the vicious cycle created by the recession," he said.

Romanian authorities should target a long-term economic growth, one that will not intensify or recreate past imbalances.

"The central bank's estimations indicate a small probability that the imbalances should return, provided, of course, that the economic policies remain adequate. The external deficit, the one that's been creating the biggest vulnerabilities, has dropped to around 4%-5% of the gross domestic product. We hope it will remain in this area," Isarescu said.

He added the external deficit could be financed from foreign direct investments, as Romania's potential in the sector is of 4% to 5% of GDP.

"The big question remains whether the external deficit will stay at 5%-6% of GDP once the economy starts growing, or it will widen toward 10% again," Isarescu said, adding that consolidating the deficit would make investors more confident in the local economy.

Isarescu said the procyclic behavior of Romania's fiscal policy is likely to break down in the first half of 2011.

"This would be a great accomplishment. It means we're out of the vicious cycle," he said.

The central bank estimates an economic growth of 1.5% in 2011, after a contraction of 1.3% a year earlier.

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