Merrill Lynch: The recession will bring investors in Romania

Romania’s economic growth will reach 8.5 percent in 2008, according to Merrill Lynch estimates, quoted by the Mediafax news agency.

“The lowest growth rates are expected in the United States, Spain, Turkey, Taiwan, Italy, and Belgium. The highest growth rates will be registered in Qatar, China, India, Peru, Nigeria, Panama, Egypt, Indonesia, Slovakia, and Romania,” shows the report.

According to Cornel Marian, the Managing Director of the Oresa Ventures investment fund, the study can be a winning forecast, provided that the government acts quickly and boosts the confidence of investors. “The government must quickly take measures to ensure stability for the Romanian business environment, and most important messages include setting a credible fiscal deficit, and announcing credible financing sources. An agreement with the IMF [International Monetary Fund] would be welcome, even if it will not be necessary to draw any funds,” Marian told Business Standard. He added that clear measures would reduce the uncertainty regarding the leu’s exchange rate.

Merrill Lynch expects the inflation rate in Romania to drop to 4.7 percent in 2010 and to 5.5 percent in 2009, from 8.1 percent in 2008. Annual inflation in Romania amounted to 7.39 percent in October, considering the key rate is 10.25 percent. Merrill Lynch analysts expect the National Bank of Romania (BNR) to lower key interest down to 8.75 percent in 2009 and to maintain this level through 2010.

“The biggest risk in our scenario is the possibility that economic growth and capital flows bounce back faster than expected. Also, the initiatives of international lenders in their attempt to support emerging countries could fail, which would affect the currencies of those countries,” the report indicated.