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Analysts Worried About Foreign Negative Sentiment On Romanian Economy

Romanian economic analysts on Wednesday voiced their concern over recent estimations on the country’s financial and banking evolution made by foreign analysts, saying their pessimistic evaluations come at a time when foreign investors show prudence toward emerging markets.
Analysts Worried About Foreign Negative Sentiment On Romanian Economy
16 apr. 2008, 16:07, English
“Recently, the media has been reflecting opinions of several foreign analysts who basically see a worsening of problems in Romania, expecting a widening of the current account deficit to 17-18% of the gross domestic product, a key rate hike to over 12%, a depreciation of the Romanian leu to over RON4 to the euro and a fall in the stability of the banking system to the critical point. Such hasty evaluations are especially worrying as foreign investor sentiment is rather alert toward all emerging markets,” the Romanian Financial and Banking Analysts Association, or AAFBR, said in a statement.
 
The analysts believe that the current account gap, although wide, could never reach 17-18% of GDP and the opinions of foreign analysts are exaggerations which do not consider the realities of the Romanian economy or which leave aside certain particularities following the country’s accession to the European Union.
 
The widening of the trade gap in 2007 was triggered by a series of elements, such as a delay in imports in 2006 ahead of the elimination of customs taxes, changes in the registration methodology for EU imports and a unsustainable appreciation of the local currency in the first half of last year.
 
Given that such elements are unlikely to occur again, the estimations concerning a further widening of Romania’s current account gap are unjustified, the Romanian analysts said.
 
The last three months show a significant calming in the widening of the trade deficit, due to a slowdown in imports coupled with an increase in exports. This development indicates an unexpected rapid reaction of the Romanian economy, as the currency went back to levels that better reflect the efficiency of the Romanian economy, analysts said.
 
As to the evolution of the Romanian banking system, analysts believe Romania hardly confronts with a systemic crisis in the field.
 
“We believe the central bank has the necessary instruments to inject liquidity into the banking system, an operation which is currently done by all major central banks in all financial systems where they are net lenders. The possibility that the Romanian central bank might become from now on a net lender would only be a sign of normality,” the analysts explained.