Oxford Economics Downgrades View On Romania’s 10 GDP Growth To -0.6%

However, it expects a 5% growth in 2011 on a rebound in consumption and investments.

„But risks remain weighted to the downside. Consumer and business confidence are still weak and industrial output is only gradually reversing falls posted in the December-February period. At least exports picked up through to March, but lower EU growth from intensified fiscal tightening is a threat to this progress,” Oxford Economics said in a report.

Analysts note that the consumer confidence is still low, thus impending a pickup in domestic demand, given also the threat of significant public job cuts.

On the other hand, Oxford Economics expect the external deficit to widen to 6.7% of the gross domestic product in 2010, from 4.5% of GDP last year. In 2011, the current account gap is seen at 9.5% of GDP.

The thinktank forecasts the central bank will cut the monetary policy rate to 5.5% by the end of the year.

„This easing should aid the recovery, both directly and indirectly through a modest weakening in the exchange rate – whose strength the central bank has expressed concerns about,” the report said.

Oxford Economics sees the year-end inflation to be within the central bank’s 2.5-4.5% target range, at about 4.2%.

It notes that fiscal problems intensify, as the International Monetary Fund asked for further spending cuts, while allowing a raise of the budget deficit target to 6.8% of GDP, from 5.9% of GDP previously agreed.