EBRD reduces the economic growth forecast of Romania

The European Bank for Reconstruction and Development (EBRD) has decreasingly reviewed the economic growth forecast of Romania for 2012 from 1.2% to 0.8 percent and for 2013.

EBRD warned that the difficult external situation and internal political crisis could affect on short-term the GDP growth.

Changing the economic estimates for the current year reverses the last review by EBRD, from the report in May, when the banking institution in Romania raised the forecast from 0.8 percent to 1.2 percent.

EBRD worsened Romania's economic growth expectations for the next year from 2.6 percent to 1.8 percent.

"Until recently, the Romanian economy was about to record a robust growth in 2012, after the recovery in 2011.

"The slowdown in the euro area has a significant damping effect on exports, and evidence of some financial deleveraging of border banks highlights the importance of crisis transmission on the financial sector channel.

"The weak external climate and the political crisis triggered in July could adversely affect on short-term the economic growth.

“Strong financial support from the IMF and other international financial institutions provided a significant protection ", says the report banking institution.

In the transition region, the growth would slow from 4.6 percent last year to 2.7 percent this year and 3.2 percent in 2013, following the eastward expansion of the impact from the euro area.

EBRD report shows that countries exposed in Central and South-East Europe have already registered a lower growth, while the decline in commodity prices has come to affect Russia and other exporters in the field.

In South-East Europe, region which includes Romania, the European Bank for Reconstruction and Development sees a high uncertainty of short-term economic prospects.

The financial institution of the region forecasts an advance of 0.7 percent this year and 1.7 percent for the next year.

The previous estimation of EBRD in May indicated an increase of 1 percent for this year and 2.4 percent next year.

Three of the countries of the region in which EBRD operates will record contraction this year - Slovenia, 2 percent, Hungary 1.3 percent and Croatia, 1.2 percent.

For Poland, EBRD slightly improved the forecast of economic growth, from 2.7 percent to 2.9 percent while for Bulgaria has kept it at 1.2 percent.

Russia will have this year an increase of 3.1 percent compared to previous estimation of 4.2 percent, due to the impact of lower demand for raw materials.

EBRD states that the economic situation in the euro area also affects also certain countries in North Africa, although the region's political uncertainties and weak investor confidence are key factors to slow growth.

Translated by Alexandra-Diana Mircea
MTTLC, Bucharest University