Romania’s Gross Domestic Product (GDP) will register this year a 2 percent contraction after a 7.1 percent growth in 2008 and, in 2010, it will return to positive territory, with an estimated growth of 1 percent, followed by a three percent growth in 2011, says the latest economic report released on Thursday by the World Bank (WB), dedicated to the European Union (EU) newly entered member states.
„The impact of the international economic crisis upon the new EU member states proved to be more severe than anticipated a few months ago. The latest estimations indicate a GDP decline in EU10 of 2.9 percent in 2009, followed by a 0.3 percent growth in 2010.
These estimations remain very uncertain because they depend, on their turn, on the estimations related to the recession turning point and the economic growth of the main commercial partners, mainly of those in the EU”, WB report further says.
The report draws the attention upon some factors which explain the various impact the crisis had upon the new EU member states.
A first factor is the reduced access to foreign funding, under conditions in which the foreign financing needs are lower in the countries with a current account deficit below 10 percent of the GDP (the Czech Republic, Hungary, Poland, Slovakia and Slovenia) compared to the countries with a higher than 10 percent deficit (the Baltic countries, Bulgaria and Romania).
A second factor which explains the differentiated impact of the crisis upon the EU10 is the stage of their banking system. The international banks, mainly in the EU member countries, play a very important role in the new member states and these banks’ behavior in the current context is the one which determines to a great extent credit availability and the banking system’s stability in EU10.
In its turn, this behavior depends on the refinancing needs of the parent banks, on the incentives aimed at the reduction of the indebtedness degree in the current crisis context and on raised risks triggered by the adjustment of the exchange rate and the macro-economic decline.
A third factor of differentiation is the exchange rate type. There are two countries (Slovakia and Slovenia) which joined the European Exchange Rate Mechanism – ERM and therefore gave up the possibility to adjust the exchange rate and to have an independent monetary policy.
There are countries with a fixed exchange regime (Estonia, Lithuania and Bulgaria) and countries with a floating exchange rate (the Czech Republic, Hungary, Poland and Romania). The WB report underlines that the countries with a floating regime registered a sudden depreciation of the exchange rate throughout the financial crisis.
EU10 includes Romania, Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. Reports in the series of „EU10 Regular Economic Report”, published starting with March 2004, offers a summary of the economic evolutions in the region and analyses on current economic subjects.