The Economist Intelligence Unit expects the political scene to be volatile as the government struggles to cope with the continuing fallout from the recession of 2009, including rising unemployment and growing levels of popular dissatisfaction. There is a high risk of social unrest in 2010. A coherent majority government is unlikely to emerge in the next five years, repeating the post-communist pattern of coalition or minority governments struggling to implement coherent policies.
The population will continue to decline over the next five years. Government plans to address the problem through a series of policy measures are unlikely to have much effect, as the rate of natural increase is not easily susceptible to official intervention. (page 11)
Romania’s overall score in our business environment rankings rises modestly, to 6.26 out of 10 in 2010-14, as a result of improvements in the foreign trade regime, and in policy towards private enterprise and competition. The infrastructure ranking also improves. (page 13)
We expect the consolidated general government budget to record deficits equivalent to 7% of GDP in 2010, 4.4% in 2011 and 3.4% in 2012, based on national methodology. (page 15)
There have been strong indications that Romania will delay adoption of the euro, scheduled for 2015, by several years. (page17)
The leu remains subject to volatility, as the NBR maintains a flexible exchange rate. The leu may still be relatively overvalued, despite the exchange-rate correction of 2008-09. (page 21)
The structure of the financial sector undergoes significant changes as there is increasing diversification of financial instruments. The capital market begins to play a greater role as the private pension system starts to take off. Measures by the European Bank for Reconstruction and Development (EBRD) to improve finance to SMEs start to take effect. (page 23)
Real GDP growth is forecast to average 5% in 2012-14, driven by a revival of consumption and investment growth and a strong export performance (page 28)
Productivity growth will improve gradually as the economy recovers in 2011-14, based on a smaller labour force.
The leu depreciated by 7.4% in real terms in 2009, but other currencies in the region also depreciated. Based on estimates of equilibrium exchange rates, the leu may still be overvalued. (page 34)
Romania’s advantages as a location for investment include a domestic market of about 22m consumers and the potential—partly owing to a good geographical position at a crossroads of traditional trade routes—to emerge as a regional hub. (page 40)
FDI inflows almost halved to US$6.8bn in 2009, from US$13.9bn in 2008, but will average about US$9bn per year in 2010-14. (page 43)
Romania has the second-largest economy of the ten east European countries that joined the EU in May 2004 and January 2007, but its level of GDP per head at purchasing power parity (PPP) exchange rates lags behind most of the other new EU entrants. (page 46)
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