ANALYSIS – Record economic growth ups the leu, but key interest rate remains constant
The record economic growth in Romania in the first half of the year, fueled by hikes in agriculture and constructions, could lead to the appreciation of the leu, but will fail to trigger an increase of the monetary policy rate, analysts deem.
The gross domestic product (GDP) stood at 195.8 billion lei (53.3 billion euros) in the first semester, an 8.8 percent year-on-year increase. The annual economic growth rate for the second quarter registered a record 9.3 percent, compared to the estimated value of 8-8.5 percent.
Romania's national currency, the leu, could climb to below 3.50 lei against the euro, but the key interest rate established by the central bank (BNR) will remain unchanged, estimated Nicolae Alexandru Chidesciuc, senior economist at ING Bank Romania.
The good results in agriculture in the second quarter could lead to a decrease in food prices and temper inflation in the following months, analysts deem.
Romania's economy could reach a growth rate of 8-9 percent this year, above its potential, BNR governor, Mugur Isarescu, announced in August, when he presented the quarterly inflation report.
Analysts will revise upwards the GDP growth estimates for the entire year, on learning the results for the first semester of 2008.
"The economic growth in 2008 cannot stand below 8 percent," estimated Lucian Anghel, chief economist at Romania's largest lender by assets, Banca Comerciala Romana (BCR).
ING Bank has recently revised upwards its estimate for the GDP advance in 2008 to 8.1 percent and will further increase it towards 8.5 percent following the data for the second quarter of the year.
Romania's economic growth could brake brutally to below 4 percent in 2009
Analysts warn the economic growth rate exceeded the potential and Romania will not be able to repeat this performance in the next years. Moreover, they say the country's economic growth could slow down brutally to below 4 percent in 2009.
Agriculture and constructions were the sectors which paved the way to a record high in the GDP, said chief economist for Raiffeisen Bank, Ionut Dumitru, who also deems the country will not witness the same achievement in the next years. He estimates a 7.5 percent advance of the GDP in 2008.
The economic growth rate could reduce suddenly to below 4 percent in 2009, when the effects of a relaxed fiscal policy, an economic showdown in Eurozone (Romania's main commercial partner) and BNR's restriction norms for lending will be the most visible, according to Chidesciuc.
"We could witness a lower economic growth in 2009, below the 6 percent potential, and also a technical recession in economy, meaning negative growth rates from a quarter to another, for at least six months in a row," Chidesciuc said, adding it happened the same thing in 2005, following the significant advance in 2004.
He underlined economic recession will not happen, as that includes a higher unemployment rate and lower salaries, unlikely to occur in Romania.
The previous record high in H1 economic growth was reached two years ago
The previous highest level in Romania's economy was recorded in 2006, when the GDP rose 7.4 percent year-on-year in the first half and 7.9 percent in the second.
The fastest economic growth happened in the last two quarters of 2004, a 9.8 percent hike in July-September and a 9.5 percent advance in October-December, but comparisons between trimesters are not relevant.
Romania's Economy and Finance Minister, Varujan Vosganian, said on August 21 that Romania's GDP increased almost 9 percent in the second quarter of the year and about 8.6 percent in the first half, according to preliminary statistics.
"Romania's economic growth had not reached this level since the communist period, but we cannot make a comparison with those figures, as there were used other indicators," he explained.
Romania’s gross domestic product (GDP) stood at 86.745 billion lei (23.5 billion euros) in the first half of the year, up 8.2 percent versus the similar period in 2007, beating analysts' estimates.
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The gross domestic product (GDP) stood at 195.8 billion lei (53.3 billion euros) in the first semester, an 8.8 percent year-on-year increase. The annual economic growth rate for the second quarter registered a record 9.3 percent, compared to the estimated value of 8-8.5 percent.
Romania's national currency, the leu, could climb to below 3.50 lei against the euro, but the key interest rate established by the central bank (BNR) will remain unchanged, estimated Nicolae Alexandru Chidesciuc, senior economist at ING Bank Romania.
The good results in agriculture in the second quarter could lead to a decrease in food prices and temper inflation in the following months, analysts deem.
Romania's economy could reach a growth rate of 8-9 percent this year, above its potential, BNR governor, Mugur Isarescu, announced in August, when he presented the quarterly inflation report.
Analysts will revise upwards the GDP growth estimates for the entire year, on learning the results for the first semester of 2008.
"The economic growth in 2008 cannot stand below 8 percent," estimated Lucian Anghel, chief economist at Romania's largest lender by assets, Banca Comerciala Romana (BCR).
ING Bank has recently revised upwards its estimate for the GDP advance in 2008 to 8.1 percent and will further increase it towards 8.5 percent following the data for the second quarter of the year.
Romania's economic growth could brake brutally to below 4 percent in 2009
Analysts warn the economic growth rate exceeded the potential and Romania will not be able to repeat this performance in the next years. Moreover, they say the country's economic growth could slow down brutally to below 4 percent in 2009.
Agriculture and constructions were the sectors which paved the way to a record high in the GDP, said chief economist for Raiffeisen Bank, Ionut Dumitru, who also deems the country will not witness the same achievement in the next years. He estimates a 7.5 percent advance of the GDP in 2008.
The economic growth rate could reduce suddenly to below 4 percent in 2009, when the effects of a relaxed fiscal policy, an economic showdown in Eurozone (Romania's main commercial partner) and BNR's restriction norms for lending will be the most visible, according to Chidesciuc.
"We could witness a lower economic growth in 2009, below the 6 percent potential, and also a technical recession in economy, meaning negative growth rates from a quarter to another, for at least six months in a row," Chidesciuc said, adding it happened the same thing in 2005, following the significant advance in 2004.
He underlined economic recession will not happen, as that includes a higher unemployment rate and lower salaries, unlikely to occur in Romania.
The previous record high in H1 economic growth was reached two years ago
The previous highest level in Romania's economy was recorded in 2006, when the GDP rose 7.4 percent year-on-year in the first half and 7.9 percent in the second.
The fastest economic growth happened in the last two quarters of 2004, a 9.8 percent hike in July-September and a 9.5 percent advance in October-December, but comparisons between trimesters are not relevant.
Romania's Economy and Finance Minister, Varujan Vosganian, said on August 21 that Romania's GDP increased almost 9 percent in the second quarter of the year and about 8.6 percent in the first half, according to preliminary statistics.
"Romania's economic growth had not reached this level since the communist period, but we cannot make a comparison with those figures, as there were used other indicators," he explained.
Romania’s gross domestic product (GDP) stood at 86.745 billion lei (23.5 billion euros) in the first half of the year, up 8.2 percent versus the similar period in 2007, beating analysts' estimates.
NewsIn
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