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Capital Economics: It is premature to talk about recovery in Romania. The economy will shrink for the second year in row

de C.B.
Luni, 14 septembrie 2009, 12:16 English | Regional Europe

Romania's Central Bank says Romania's economy will soon get out of the recession. But Capital Economics economist for emergent markets Neil Shearing told Bloomberg that Romania's economy will contract for the second year in row.

"It’s premature and a bit worrying to start talking about recovery", Shearing claims. "Clearly the outlook has improved but there are still too many downside risks. We see economic contraction of half a percentage point next year", he continued.

Romania's Government announced that the economy has started to recover after the industrial production and retail sales recorded encouraging reports, while the quarterly contraction of the Romanian GDP slowed down, Bloomberg reads. France and Germany, two countries upon Romania relies when it comes to export demands and investments, have started to recover in the second quarter. This determined the analysts to estimate a recovery of the most East-European states by the end of this year.

"Bad debt will continue to rise and the labor market will continue to deteriorate, which will further expose the banking sector,” Shearing said. “All in all there are too many uncertainties. And, not least, we will see fiscal policy tightening throughout next year."

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