Romanian economy facing higher risks, think-tank says

Amidst a global liquidity crunch and faced with an expected slowdown in global economic growth in the coming years, Romania is one of the seven most vulnerable countries, credit insurance company Euler Hermes said in a report.

“Looking at the channel of goods trading, we identify 45 economies (including many advanced ones), that are highly dependent on exports and thus susceptible to register a significant slowdown of the (economic) cycle”, the report said. “Seven of these countries are confronted with higher systemic economic risks in the context of global liquidity, high public and foreign debt rates as well as their macroeconomic policies (including Italy, Romania, Croatia and Vietnam).”

Euler Hermes also warned that while inflation has been on the rise in Romania (at a rate of 3.8 percent in February, 4 percent in March and 4.1 percent in April) the Romanian National Bank (BNR) has kept its reference rate unchanged at 2.5 percent, despite the misgivings of some members of its steering board regarding future inflation trends. These trends indicate that inflation could rise to 4.2 percent this year from 3 percent in 2018.

“Among Central and Eastern European countries, (most notably Romania and Hungary), inflation has indeed been coupled with economic growth rates well above the European Union average. Despite that, the 5.1 percent Romanian GDP growth in the first quarter also came with the higher risks detailed above “, said Mihai Chipirliu, head of risk analysis at Euler Hermes Romania. “These potential elements of instability in the context of a political instability and the lack of any corrective measures to address the imbalance, may well have repercussions on exchange rates.”


Title image: Dacia assembly plant in Mioveni (source: Youtube)

Author: Dénes Albert