Romania Business Forecast Report Q1 2011: New research report available at Fast Market Research

Jan. 2, 2011 - PRLog -- Austerity Continues To Weigh On Near-Term Outlook

Although the worst of Romania's deep recession is no doubt behind us, we nevertheless expect further weakness in the domestic economy through the near term. The Romanian government is currently implementing a severe package of fiscal austerity in order to correct a substantial imbalance in its budgetary position resulting from the recession. While we see this tough adjustment path returning Romania's budgetary position onto a sustainable footing over the medium term, the resultant demand destruction will weigh heavily on economic growth in the interim. Over the longer term though, we expect Romania to show solid growth dynamics as economic convergence and integration with Western Europe plays out.

Romania's accession to the EU 's Schengen area looks at risk of being delayed by its poor progress in areas such as tackling corruption and instigating judicial reform. Indeed, several EU leaders have stated their opposition to Romania joining the Schengen area while such issues remain unresolved. Given the government's thin parliamentary majority and immediate economic challenges, we expect progress on corruption and judicial reform to be slow to materialise, and therefore highlight the risk of substantial delays to Romania's entrance into the Schengen area.

Our prediction that Romania's economy would take a double-dip growth path, re-entering recession through the second half of 2010, looks fully justified by the National Institute For Statistic's (NIS ) initial estimate of Q310 GDP. With the government implementing dramatic fiscal austerity in order to rein in its sizeable budget deficit, we reiterate our forecast for a 1.9% real GDP contraction over the course of 2010 and for only tentative growth to be seen through 2011.

While we believe the Romanian banking sector has compelling long-term growth prospects, we expect conditions over the next few quarters to remain extremely testing. The weak state of the Romanian economy will limit asset growth and weigh on loan book quality, affecting profitability. We believe that loans denominated in foreign currency are particularly vulnerable to losses due to the impact of leu weakness on borrowers' debt obligations.

For more information or to purchase this report, go to:
-  http://www.fastmr.com/prod/106387_romania_business_foreca...

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.