UniCredit: External Financing Remains Romania’s Main Challenge In 2012
External financing could prove costly for Romania in the first half of 2012 and the country may have to tap into a EUR5 billion loan made available through a precautionary program from the International Monetary Fund and the EU, Italy’s UniCredit said in a report Thursday.
In its latest forecast report for the central and eastern Europe, UniCredit said financing Romania’s budget deficit might be difficult, given that local banks are likely to reduce their exposure to government bonds, while foreign investors are less inclined to invest in the region.
“Western European banks’ deleveraging represents a clear downside risk with some countries more exposed than others,” Gianni Papa, the head of UniCredit’s eastern European division, said. “But according to our baseline scenario, this remains a manageable drag.”
The Italian bank kept its forecast on the economic growth unchanged at 1.4% in 2012 and estimated Romania’s budget deficit will narrow to 2.5% by year-end, from around 4.4% envisaged in 2011.
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