A new report from Fitch Ratings predicts a slow down in the 10 Central and Eastern Europe (CEE) countries that joined the EU in 2004 and 2007, which include Romania. The study forecasts average GDP growth of 1.6 percent in 2012 for the 10 states, just over half the 3.1 percent average recorded in 2011. Romania's GDP is expected to grow by 1.5 percent in 2012.

Fitch expects the slowing in the economies to be far more gradual than in 2009. “In Fitch's baseline scenario the global economy is expected to experience a far more moderate slowdown than in 2009. Thus, eight CEE-10 economies are expected to grow in 2012,” reads the report.

Exports for the area are considered weak, due to lack of demand from the eurozone and austerity is restraining domestic consumption, both private and governmental, in the region. Construction in the region is subdued, according to Fitch, although there has been some recovery, “particularly in those countries where the unwinding of the pre-crisis construction boom had caused confidence in the sector to go into freefall.”

Slow growth has made it difficult for countries in the region to achieve targets for deficit reduction, despite the best intentions of the governments in sticking to austerity and reform programs, however, Fitch gives a stable outlook on the CEE sovereign ratings, with the report stating that “in most cases, existing sovereign ratings across CEE are unlikely to change over the coming 18 months.”

Liam Lever, liam@romania-insider.com