ING: Romania’s Economy Risks Hard Landing

Chidesciuc said the macroeconomic adjustments will be noticeable starting with 2009, while ING revised downward its economic growth forecast for the next year, from 5.1% to 3.8%.

ING analysts see the 2008 and 2009 budget deficit exceeding 3% of GDP, taking into account recent laws regarding salary increase.

The 2008 deficit, computed according to European standards, will probably be at 3.8% of GDP, according to ING estimations.

ING analysts also expect exports to slow down, starting in the last part of this year, having in mind that non-euro states will also be affected by recession.

Chidesciuc said exports to the European Union already face a slowdown, that will widen in the future.

ING also estimates the current account deficit will hike at 14.3% of GDP in 2008, compared with 13.9% of GDP a year earlier, given that the Romanians working abroad sent less money home.

Under the current circumstances, an adjustment of the current account deficit could only be possible by the depreciation of the leu of by a significant consumption decrease, Chidesciuc concluded.

Earlier this week, Economy and Finance Minister Varujan Vosganian estimated that Romania’s current account deficit will narrow to 13.5% of gross domestic product and exports will grow at a higher pace than imports in 2009 when the current account deficit will slow to 12% of GDP.

The Romanian government recently revised, for the third time this year, the state budget, keeping a budget deficit target of 2.3%.