EC: Political Uncertainty May Hinder Romania’s Economic Recovery

„The current political turmoil could delay the implementation of the announced expenditure cuts and could weaken the willingness and capacity of the authorities to control the traditional end-year surge in public spending,” the Commission said in its autumn forecast Tuesday.

The Commission revised upward its forecast for Romania’s economic growth to 0.5% in 2010, from a zero growth rate previously envisaged. For 2009, it sees a 8% GDP decline.

„There are upside risks to this macroeconomic outlook. Assuming that global financial markets do not go through another round of stress, the economy may recover slightly faster than projected in this baseline,” the Commission noted.

„On the negative side, the current political uncertainty could delay the implementation of measures aimed at stabilising the economy and weaken the recovery in a still fragile external environment,” it added.

According to the report, the current political gridlock may weaken or delay the fiscal consolidation and structural reform efforts.

The Commission envisages the country’s budget deficit will deteriorate to 7.8% of the GDP this year, from 5.5% in 2008. For 2010, the Commission predicts Romania’s budget deficit will „decline only marginally” to 6.8% of the GDP.