ING: Pre-Election Spending To Mitigate Romanian GDP Drop In 1H
Romania might be able to fend off some of the external pressure following the economic downturn in the euro zone in the first half of 2012, aided by pre-election spending, but the boost will be short-lived as the authorities are determined to continue fiscal adjustments, ING Bank said Monday.
“Pre-election spending should partially mitigate the 1Q12-2Q12 recession that is likely to be triggered by the drop in the euro zone gross domestic product, but this growth boost will be limited as the executive consistently talks of sticking to the fiscal correction line,” ING said in its Emerging Europe 2012 outlook.
It said Romania’s high share of foreign currency debt puts the country in one of the worst positions in the region, as net external liabilities exceed 60% of GDP. Moreover, the eastern European country has strong financial ties to Greece, of about 16% of GDP, making it vulnerable to potential spillovers.
“This external picture, the weak recovery backdrop and stress in external funding markets hint the leu is set to weaken,” the report noted.
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