Romania’s GDP growth exceeds expectations, central bank says

BUCHAREST – Romania’s gross domestic product (GDP) growth probably rose by around 5 percent in 2002, beating both official and market expectations, the central bank said yesterday. Exports, helped by the firming of the euro, grew by 21.8 percent year-on-year to a record $13.86 billion last year and growth was also fueled by increased investments and a stronger private sector, officials and analysts said. «We estimate an economic growth of around 5 percent for 2002,» Cristian Popa, deputy central bank governor, said. «We think investments rose by around 8 percent for the whole year and exports had an even more spectacular rise.» Analysts said the central bank figure stands at the top of their GDP estimates. The country’s Statistics Board had predicted a 4.7 percent rise after 5.3 percent growth in 2001. «After 10 years of hesitant economic policies, we have now a private sector strong enough to provide a decisive push to the economy,» ABN Amro senior analyst Radu Craciun told Reuters. «However, it will have to be further encouraged to lead to an even better economic performance,» he added. Analysts had said Romania’s economic growth might not be as high as the projected 5.2 percent this year, although the country might meet its ambitious inflation and budget deficit targets agreed with the International Monetary Fund (IMF). Under a $396 million standby accord with the IMF, Romania pledged to slash inflation to 14 percent this year from 17.8 percent in 2002 and cut its budget deficit to 2.65 percent of gross domestic product from an estimated 3 percent last year. Analysts said expectations of slower export growth in 2003 as well as delays in restructuring key industrial sectors made them pessimistic about the government’s economic growth target and forecast only 4.7 percent GDP growth in 2003. «Last year’s rise in exports was mainly fueled by the firming of the euro against the Romanian leu, reflecting the euro’s strength on the world markets, a performance which may be reversed,» Craciun said. He said a weaker euro would result in Romania’s exports growing by only up to 9 percent in 2003. Analysts said sluggish restructuring and privatization in key sectors such as the energy and industry also cast a shadow over the government’s economic growth projections. «If the government had followed the IMF’s recommendations about structural reform, the private sector would now have a higher contribution to GDP and we would have a healthier economy,» said an analyst who declined to be named. Under the IMF standby accord expiring in August, the government must privatize two power distribution companies and national oil company SNP Petrom as well as speed up the sale of companies with more than 1,000 employees. The central bank also announced that Romania will switch to the euro from the dollar as its reference currency as of next month to better reflect the weight of the eurozone on its foreign trade.