Romania’s New Govt To Face Imminent Econ Crisis – Oxford Analytica

Oxford Analytica experts said Romania deals with its first economic crisis since the fall of communism, while its performance in 2008, when it reported a record economic growth of 9.1% in the first nine months, was significantly slowed down by the global financial crisis.

In the last three months of 2008, the monetary policy was revised and marked by restrictions, while the industry sector and banks needed the Government’s support.

No bank in Romania, however, was significantly affected by the international turmoil, although there had been problems in lending.

The coalition Government formed of the social democrats and the democrat liberals commit to resort to the solid parliamentary support to fight problems regarding institutional and economic development reforms, analysts noted.

The new cabinet has announced cutbacks of nearly 1% of the Gross Domestic Product in 2009, especially by eliminating 145,000 vacant positions.

In the justice field, minister Catalin Predoiu eyes having the monitoring of the country’s legal system lifted by the European Union.

As far as macroeconomic policy is concerned, the purpose is to keep the current system of taxes, and having a strategy to simplify it and to create a separate system of tax exemption for underprivileged people.

The budget for 2009 will be presented to the Parliament in January. Speculations include an economic growth of 0.5% to 3.5% and an inflation of 5.1% – 7.4%, according to Oxford Analytica.

The analysts point out the depreciation of the national currency will affect people resorting to loans.

The decisions of Fitch and Standard&Poor’s to lower Romania’s rating were deemed “exaggerations based on groundless proof” in Romania, Oxford Analytica said.

The budget deficit is a reason to worry in Romania, but contracting loans might help diminish it, Oxford Analytica experts said.

The assessment concluded that signs of an economic crisis have become obvious in Romania in the past three months of 2008.

The new Government – seen as an “unexpected coalition” – announced a governing agenda based on “realism and dynamism, which offers real chances to avoid severe crisis consequences”.