“70% of exports are headed to the EU, while Germany and Italy are the main partners, with a share of around 30% of the total. The industry sector has already shown signs of weakness amid the declining external demand, and the trend may continue in 2012, with a direct impact over the business cycle,” reads a BCR report.
“At the same time, investors have proven reluctant in placing money in a gasping economy and thus direct foreign investments are still in the red, already signaling capital investments will not have such a large contribution to growth as we’d expected”, said BCR analysts.
The bank also expects a slow rebound in private consumer spending. For 2011, the GDP growth projection stays at 2%. Another BCR estimate revision is related to the National Bank of Romania (BNR) key interest rate, which is expected to remain unchanged at the current level of 6.25% per year until mid-2012, instead of the increase forecast in the previous estimate. Inflation estimatations for 2012 dropped from 4.2% to 3.9%.
On the other hand, as a result of the risk aversion repeatedly seen on foreign markets, BCR has dramatically reviewed its exchange rate forecast for the end of this year, from RON4.15/euro to RON4.28/euro, seeing higher odds for a leu decline scenario. For 2012, BCR sees the euro at RON4.2.
(English version by Catalina Apostoiu; Editing by Loredana Fratila-Cristescu)