The analysts of the Austrian financial group Erste expect Romania to be in a better position to deal with a shock caused by the deterioration of the situation in the euro zone and recommend the leu and zloty as investment opportunities. Erste Group is one of the largest investors in the Central and Eastern Europe and shareholder of BCR, Romania’s largest bank.
“If the euro area decelerates sharply, Central and Eastern Europe will not avoid contagion. But there are three reasons why CEE should do much better this time (relative to the euro area) than in the post-Lehman period: much lower public debt levels, improved fiscal consolidation and trimmed down current account deficits,” says Juraj Kotian, Co-Head Macro/Fixed Income Research CEE at Erste Group.
Romania ended 2010 with the second-lowest public debt level against the gross domestic product (GDP) in Europe, that is 31% of GDP, behind Bulgaria, whose public debt stood at 16% of GDP. In the euro area, the average public debt reached 80% of GDP. Romania saw the fastest structural deficit reduction in the Central and Eastern Europe, from almost 9% of GDP in 2007 to approximately 3.3% of GDP, according to the European Commission’s estimates for 2011. Moreover, its current account deficit shrank by one of the highest rates from 13.4% of GDP in 2007 to 4.4% of GDP estimated for 2011.
“The current levels of the Polish zloty and the Romanian leu look interesting – in terms of investments,” the analyst said.
The leu has had one of the most stable trends of all the currencies in Central and Eastern Europe this year. It was also attractive because of the high interests of about 7% a year. Romanian government securities, too are in high demand: the Public Finance Ministry on Monday borrowed 800 million lei in the first issue of two-year bonds, for which it will pay 7.4% a year. Banks subscribed RON1.485 billion worth of bonds, 75% more than the indicative value of RON800 million.
The euro zone is now undergoing its trial by fire because of the problems Greece is facing with a risk of contagion to the entire European banking system.
(English version by Loredana Fratila-Cristescu)