Several meetings were held this month in Romania with officials from the IMF, World Bank, National Bank of Romania, Ministry of Finance, Foreign Investors Council, The Bucharest Stock Exchange, local bankers and journalists.

Summary

Romania benefits from macroeconomic stability, low fiscal deficit, high fiscal reserves, a low and gradually declining sovereign debt/GDP ratio, modest current account deficit, better than peers GDP growth rate and a solid banking sector. The IMF/EU/WB anchor remains firmly in place. 

Parliamentary elections in November pose a risk in the event that no strong coalition government emerges. Tension between the current PM and President are not conducive to a favorable investment climate.

Even though the current account deficit has stabilized at a reasonable level of 4-4.5% of GDP, low FDI and poor capital flows are not supportive of currency appreciation. With NBR facing a EUR3bn repayment to the IMF next year, there is concern about a potential drop in FX reserves, even though these are still very high. 

Growth will be weak in 2012 but higher than peers. Poor absorption of EU structural funds is a great disappointment. Structural reforms are needed for the country to achieve high GDP growth rates again.