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Foreign investors could shun Romania, driven away by prognoses, central bank's governor warns

Foreign investors could stop spending money in Romania despite efforts of local authorities to keep them here, an effect of the pessimistic prognoses on the country's economic slowdown, according to the governor of the central lender BNR, Mugur Isarescu. It is up to government to take whichever measures necessary to reestablish foreign investors' trust in the local economy, such as resuming foreign capital flows and strengthening the fiscal and wage policies, he said.

The government could improve the foreign investors' perception of Romania's economy through a higher capacity of sponging European funds and replacing the private external financing with public external one or by creating new jobs in areas poorly developed. This would underpin the economic growth, Isarescu underlined.

Moreover, financing agreements with international authorities like the European Commission or the European Investment Bank are welcomed, as they balance the smaller private capital inflows.All in all, if these measures are taken investors will improve their perception on Romania and keep doling out money here than in six other countries from Central or Eastern Europe, Isarescu concluded.Fiscal relaxation measures would aggravate the crisis in Romania

Prognoses hinting at a significant economic slowdown in Romania this year represent a danger to the efforts directed at controlling the external deficit especially if the Cabinet relaxes the fiscal and salary policies, which could deepen the crisis, Isarescu said.More and more foreign prognoses underline Romania will witness a slight, if any, economic advance this year, the governor said.Estimates of the National Forecast Commission forecast a 2.5 percent economic increase this year, but many international banks or rating agencies warn recession is waiting ahead.

Politicians tend to tackle this issue emotionally and relax fiscal or salary policies which would hurt the country more, Isarescu said. On the Cabinet's to-do-list are controlling the budget deficit to below 3 percent of the gross domestic product and keeping a close eye on inflation and the exchange rate, he added.Last year, Romania's budget deficit widened to 5.21 percent of the GDP by European standards and this year's target is 2 percent.Sticking to a deficit of maximum 3 percent is a must for the country eager to walk the Eurozone hallway in 2014.

 

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Tags: governor economic isarescu percent foreign central could prognoses romania investors bnr

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