Romanias chances to make it to top 10 economic powers in Europe

PM Calin Popescu Tariceanu said recently that Romania could become the 7th or 8th economic power in Europe in the coming years if the current economic trends continue, but the analysts interviewed by the Ziarul financiar daily do not agree with the prime minister’s forecasts.
“These are political statements. The chances for Romania to become by 2014 the 7th economic power are minimal. Maybe only if we continue with the same pace of economic growth – which is highly unlikely – and our competitors have the same low growth pace, which is also highly unlikely”, says financial a analyst Dragos Cabat.
According to the estimates of the National Prognosis Commission (CNP), Romania may reach in 2008 a GDP level of 133.8bn euro, and in 2014 it will reach 281bn euro.
At end-2007, Romania ranked 16th in the EU in terms of the GDP, and if it had had this year the GDP level forecast for 2014, it would have ranked 11th, according to Eurostat data.
Taking into account these figures, Minister of Economy and Finance Varujan Vosganian said in 2020 Romania would reach a GDP level of 440 – 450bn euro, which is related to the 9th spot in the ranking of the 27 EU states.
Even if the economic growth in Romania in Q2 2008 was more than 6 times bigger than the EU average (1.6%), certainly the other European states will not hold the same positions in the coming 5 years, say the Romanian analysts.
“I do not think it is possible for Romania to become the 7th economic power in 2014. If Romania’s GDP grows this year by 9% and in the coming years with an average of 7% per year, which represents a basically impossible variant, at end-2014 the level will continue to be lower than the one recorded last year in Germany, England, France, Italy, Spain, the Netherlands and Poland.

So, Romania would be the 8th country. This entails that, in addition to the extremely high pace that Romania should achieve permanently, the annual average pace in the 2008-2014 period in Belgium should be lower than 0.9%, in Sweden – lower than 2.8%, in Greece – lower than 3.1%, in Austria – lower than 3.4% and in Czech Republic – lower than 7.1%”, said Lucian Liviu Albu, the director general of the Romanian Academy’s Institute of Economic Prognoses.
In his opinion, Romania will most likely rank the 12th in terms of the GDP in the EU in 2014.
As to the GDP per capita in 2014, Albu says that although this indicator will be significantly closer to the European average, Romania will still have to make up for a significant gap.
Last year, the GDP per capita stood in Romania at 6,500 euro, whereas the EU average was 24,800 euro, according to Eurostat data, putting us on the 26th spot among the 27 EU states, above Bulgaria.
The analysts with the international rating agencies estimate that Romania’s economy will slow down towards the end of the year. The arguments of the Fitch ratings agency are: high inflation, unsustainable economic growth, upward revision of the forecasts on the current account deficit this year (17% of GDP), the significant rise in salaries and the fast rise in crediting.
The optimism of the Romanian officials is backed by the record results recorded by Romania in H1 2008. GDP rose in Q2 2008 by 9.3% versus Q2 2007, putting the economic growth in H1 at 8.8%, according to the National Statistics Institute (INS). The GDP in H1 2008 stood at 53.3bn lei (some 14.077bn euro).
The main reason why the local financial analysts believe a sudden slowdown in the economic growth will appear is related to the crisis currently experienced by the main trading partners in Europe. Romania exports and imports from the EU some 70% of the total volume, and the fact the big economic powers in the West – Germany and France – are in recession is causing imbalances also locally, say the Romanian analysts.

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