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BCR analyst: Romania could climb back to investment grade league no earlier than 2010

Romania could regain its investment grade rating in 2010 the earliest if it fully follows the provisions of the accord with the International Monetary Fund (IMF) and the European Commission (EC), declared for NewsIn the BCR chief-economist, Lucian Anghel.

According to Anghel, rating agencies that downgraded Romania need more time to analyze the way in which the state manages the fiscal policy. "An improvement in the sovereign rating is unlikely in 2009 due to uncertainties outside the borders concerning the country's ability to narrow the budget gap close to 3 percent of the gross domestic product (GDP)," said the economist. Moody's is the only rating agency of the three that still rates Romania in the investment grade, after S&P and Fitch downgraded the country to junk last fall.

Foreign direct investments could plunge to 5 billion euros this year Foreign direct investments could amount to 5 billion euros this year, compared to 9 billion euros at the end of 2008, when intra-group loans were also considered, added Anghel. However, due to a change in methodology, the comparable amount for foreign direct investments last year would have been around 7 billion euros, by leaving aside intra-group credits. According to BCR analysts, 2009 investments could be represented especially by capital participations and reinvested profit in industry and the financial sector. Romania's economy is estimated to shrink by 2.1 percent this year, less than the 4.1 percent contraction anticipated by the IMF. BCR sees an economic upturn of 2 percent for 2010 and 3.7 percent for 2011. The current account deficit is seen narrowing from 8.2 percent of the GDP in 2009 to 7.3 percent in 2010 and 6.6 percent in 2011. The unemployment rate is estimated at 7.2 percent in 2009, 6.8 percent in 2010 and 6.5 percent in 2011. BCR analysts also expect the budget gap to reach 4.6 percent of the GDP at year-end, a prognosis similar to the government's, but the narrow to 4 percent of GDP in 2010 and 3.5 percent in 2011.

Central lender could slash key interest to 9 percent by year-end Romania's central bank BNR could lower the monetary policy rate to 9 percent until the end of the year from 10 percent at present as inflation will reach 5.4 percent by the end of 2009, exceeding the BNR target of 3.5 percent, Anghel estimates. Moreover, the key interest rate could stand at an annual 7.5 percent at the end of 2010 and at 6.75 percent in 2011. The exchange rate in December 2009 could read 4.30 lei per euro and 4.20 lei per euro at the end of 2010.The leu could appreciate to 3.90 against the euro by 2011, according to the BCR quarterly macroeconomic analysis. The annual rate of inflation in Romania tempered pace to 6.71 percent in March over 6.89 percent the month before, contradicting analysts' expectations and fueled by higher prices for non food goods and food stuff, the Bucharest-based Statistics Institute (INS) announced.The BNR board is due to meet on May 6 for the fourth monetary policy session of the year, to discuss among others the quarterly inflation report. Most analysts polled by NewsIn deem the central bank will reduce the monetary policy rate by 0.25 percentage points the most to 9.75 percent to balance the slowdown in economy and will continue the operations to adjust liquidity, but will maintain the minimum mandatory reserves.

Sursa: http://www.actmedia.eu

Tags: percent grade bcr investment could romania euro bnr

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