Recession wave in Romania

 

 

Direct foreign investments saw a 13.9% drop in the first trimester of 2009, in contrast with the same period of 2008. They amount to EUR 1.456 billion for the first three months of the current year, as opposed to 1.69 billion Euros for the first 2008 term. Direct foreign investments amounted to EUR 9.02 billion last year, a growth of 24.5% compared to 2007. This covered 53.5% of the account deficit, its total value being EUR 16.87 billion.


The current account deficit for the first 2009 trimester was financed solely through direct investments made by non-Romanian residents: EUR 1.456 billion, according to data published by Romanian Central Bank (BNR).

 

 

Analysis and forecast (↑ increasing risk)

 

As prognostics showed, after the first quarter, the Romanian economy has started its real downturn. As investments are dropping sharply, Bucharest needs to maintain its budgetary politics as accepting new and especially unpopular disposals which would first have an effect on public sector employees. Meanwhile Romania’s central bank has cut interest rates, lowering the official policy rate to 9.5% from 10% in a cautious bid to help revive economic growth. The decision came after the International Monetary Fund finalized its €13 billion ($17.32 billion) standby loan to Romania, disbursing funds that may help the central bank manage local liquidity conditions and currency pressures.