The Economist: East European economies crack, with Romania and Bulgaria the worst off

Vineri, 28 noiembrie 2008, 10:47 English | Business

In an article published by The Economist, analysts explain why the Romanian and the Bulgarian economies are fragile and vulnerable to economic turbulences. The current account deficit, the national currency and the banking system are a few of the issues that cause worries, the experts say.

"Romania has a current-account deficit of only 14% of GDP; a floating currency that gives it more flexibility; and is less dependent on exports to the slowing euro area than Bulgaria. But it may have a harder landing. Oriens forecasts GDP growth of just 0.9% next year. Its banking system is less profitable than Bulgaria’s. Although it is mostly foreign-owned, it looks wobblier; inter-bank rates have nearly doubled this year to 15%. Foreign reserves are scantier and the IMF reckons that the currency, the leu, may be overvalued by 19%. Thanks to populist spending in the run-up to this week’s parliamentary election, the budget deficit may reach 3.9% of GDP by the year-end. That is not a lot by some standards, but it may still cloud outsiders’ willingness to provide more cash. Whatever coalition the election produces, serious reform is a long way off", The Economist reads.