EIU: Romania Vulnerable To Financial Mkt Turmoil

Romania is among eastern European countries most vulnerable to financial market turmoil, due to its wide current account deficit fueled by growth in economy and especially in domestic consumption, the Economist Intelligence Unit (EIU) said in its Global Outlook report Tuesday.

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Imaginea articolului EIU: Romania Vulnerable To Financial Mkt Turmoil

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Foreign direct investments (FDI) into Romania have played an important role in financing the account gap, EIU said. However, as large privatizations are completed, FDI inflows are expected to decline.

“The central and eastern Europe region has benefited from still-strong growth in the euro area, although some countries such as Romania and Bulgaria have large external financing requirements and hence are vulnerable to changes in investor sentiment,” EIU said.

Romanian and foreign analysts repeatedly emphasized the risks related to the country’s high current account gap, which widened to 14.2% of gross domestic product in 2007, as well as to its financing. For 2008, forecasts indicate a current account deficit of 15% of GDP.

The country’s official forecast commission expects an economic growth of 6.5% in 2008.

Romania’s 2007 GDP slowed to 6% on the year in real terms from 7.9% in 2006, primarily due to a decline in farming output.

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