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EU: Romania's economy gives 'clear' signs of over-heating

Romania's economy gives clear signs of over-heating, and GDP growth expected by the Romanian authorities for 2008- 2009 is 'optimistic to a certain extent', according to EU Council's opinion on Romania's updated convergence program over 2007 - 2009.

According to the document, 'Romania had a very strong economic growth, an annual average of 6.5 per cent, between 2003 and 2006. Yet, its very well performing economy gives clear over - heating signs, posing a high and increasing external deficit, estimated to over 13 per cent of GDP in 2007, as well as lower proceeds by Foreign Direct Investments (FDI), in spite of the high level of investments, others than the privatization contracts, but mitigated because of a higher input of medium and long term capital contributions. Other signs of over-heating are represented by the increasing labour force shortage, a strong growth in salaries and rapid development of loans taken by households. The sudden growth of the inflation rate, after a period of disinflation, had as a main reasons the shocks on offer factors, caused by poor performances in agriculture in 2007, following the weather calamities, aggravated by the effects on the global demand of incomes and loans growth, non restrictive fiscal policies, salaries in public sector and RON depreciation. For 2008, the Commission forecasts 5.8 per cent growth, and the forecast for 2009 indicates 2.9 per cent. EU Council also opines that the convergence program does not appear to be realistic in the field of public sector salaries. Sursa: http://www.rompress.ro

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