JP Morgan: Romanian GDP Likely To Grow 2% In 2011

The bank estimates Romanian economy will grow by 2% this year, followed by a more accelerated growth of 4% in 2012.

"Export oriented industry has been successfully riding the global economic rebound (…). Once economic recovery finally arrives, it will provide a tailwind to the fiscal consolidation effort and will revive investor interest in the country, creating a virtuous spiral," JP Morgan said.

The bank forecasts a one percentage point increase in exports to 29% of the gross domestic product in 2011, while imports are estimated to follow suit, reaching 34% of GDP.

While exports alone cannot support a full-fledged recovery, they will stimulate local demand via rising labor income, the analysts said.

"The key to revival of domestic demand is a return of positive animal spirits in investment activity. We see a good chance of this happening this year, with the likely improvement in the labor market and the likely improvement in confidence more generally," the report noted.

JP Morgan said Romanian budget deficit is likely to drop below 5% of GDP in 2011, from 6.5% of GDP a year earlier. For 2012, the bank estimates a budget gap of below 4% of GDP.

According to the report, inflation risks will be "fairly limited" in 2011, on the back of subdued consumer demand, stable currency and a positive base effect.

The annual inflation is estimated to ease to 4%-5% in the second half of 2011, from 7% end-January, once the effects of a higher sales tax introduced last year start to fade.

However, higher-than-expected food prices on global markets or a bad harvest could put upside pressure on the year-end inflation, JP Morgan said.

If you liked this story, please follow MEDIAFAX.RO on FACEBOOK »

The content of mediafax.ro is for your information only. Republishing or using this content is forbidden without express consent of MEDIAFAX. For this consent, please ask for it by mail at vanzari@mediafax.ro.