Study: Romania's growth shaky, clear policy on EU funds needed, labor market and exports quality must improve

Growth in 2012 for Romania is still shaky, according to a study by Banca Commerciala Romana (BCR). The 1 percent predicted growth is based on stagnation or slight recession in the eurozone economy, but the figure still looks fragile and is vulnerable to risks. “Romania [...] is exposed to contagion risks likely to feed through to the local economy by means of two main channels: investments and exports,” reads the BCR report.

The study outlines 10 challenges facing the Romanian economy in 2012, and right up at the top is Romania's old bugbear: absorption of EU funds. According to the BCR report there is a “crying need for decisive action” on EU funds and the resources could be a far greater support to long term sustainable than they currently are. The political turmoil and the upcoming elections mean that policymakers will be well scrutinized this year. Investors and institutions will want to see Romania maintaining the pace of fiscal reforms and continue to meet EU/IMF agreements, while politicians will be under pressure from voters to scrap painful austerity measures. Romania's currency, the leu, is on shaky ( there's that word again ) ground, according to the BCR study. “The leu is likely to trade within a 4.3-4.5 range against the euro for most of 2012 and only some accumulated positive factors, which now seem pretty dim and distant, may trigger a more sustainable appreciation of the local currency,” reads the BCR report. Tackling unemployment is also seen as vital by BCR's analysts and Romania's export market could be improved by a greater emphasis on quality and originality in the manufacturing sector. In conclusion, the BCR report suggests that the eurozone will ultimately determine Romania's economic fortunes in 2012 and urges Romania to focus on attracting non-debt-creating capital sources, such as Foreign Direct Investments EU funds and privatizations. This, believe BCR's analysts, will improve labor productivity, which they see as the only way to boost the quality and marketability of products in general and exports in particular. Liam Lever, liam@romania-insider.com