“The 2.6% we forecast for 2013 includes 0.7% contribution from agriculture,” reads the latest report by the bank’s London analysts.
The forecast change comes after in April JP Morgan had improved its GDP growth forecast from 1.5% to 1.9%. The bank sees Romania’s long-term growth potential at 4%.
The most upbeat economic growth forecast came from the largest Swiss bank UBS, which expects Romania’s GDP to grow 2.8% in 2013.
Romania started in 2013 to once again be “well seen” in foreign banks’ reports, after being frequently criticized in past years. The positive sentiment is largely based on expectations for political stability to continue and on the performance that Romania has already achieved in term of cutting its budget deficit.
At the beginning of the year JP Morgan made a surprise announcement – it included Romanian government securities in lei in an index of emerging markets after a similar decision by UK Barclays.
This improved Romania’s visibility on external markets and heightened the interest of foreign investors for assets in Romanian currency, but also created vulnerabilities. Romanian securities were included in the JP Morgan index at the beginning of March.
In the first four months of this year foreigners’ portfolio of Romanian government securities in lei and in euros doubled. Foreign investors held government securities worth the equivalent of EUR6.4 billion at the end of April, which corresponds to a record share of almost 26% of the total government securities issued on the Romanian market.
Amid higher volatility of financial markets, Romania could see capital outflows, given that foreigners’ government securities holdings increased significantly, with their share climbing towards 30% of the total.
Local analysts have in turn improved their economic growth forecasts for this year towards 2-2.2% after signals of a rebound were recorded in the first few months of the year. Romanian analysts do not rule out GDP growth of around 2.5% in 2013 if the agricultural year is good and if exports continue their upward trend.
At the beginning of the year most bank estimates for GDP growth in 2013 ranged between 0.5% and 1.6%, but then above-expectations GDP growth was announced for the first quarter.
The 2.2% economic growth in 1Q was double as high as analysts had expected and this led to forecasts being improved.
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The World Bank slightly improved its economic growth forecast for 2013 to 1.7% after six months ago it had predicted a 1.6% GDP rise.
On the other hand, the IMF, the European Commission and the Government continue to expect economic growth of 1.6% in 2013.
(English version by Daniela Stoican)