EU integration will boost economic growth and foreign investments, at the same time putting pressure on inflation and generating exchange rate volatility, analysts state. The immediate impact of integration will not be perceivable in terms of the economy or the capital market, and the benefits related to accession must be expected to surface on a longer term.
According to analysts, the economy will continue to expand, also boosted by investor confidence. Capital inflows will increase and direct investments will tend to be replaced by portfolio ones, once financial instruments diversify.
As in the case of the states that joined the EU in 2004, foreign capital inflows will exert some pressure in the sense of RON appreciation, though analysts say the appreciation phenomenon is going to be less intense than in the case of the currencies of the countries that became part of the EU in 2004.
Integration will also bring a wave of price hikes that analysts predict as moderate, though.
Among the states that joined in 2004, the inflationary shock was of a very low intensity for high-inflation countries, such is the case of Romania.
At the same time, analysts say integration alone will not bring investors on the Bucharest Stock Exchange. Czech, Polish and Hungarian stock markets received a growth boost, in the wake of 2004 integration, which will also happen to the BSE.
Investors will grow more confident in the domestic capital market, but they will be attracted only by the expanded product supply and particularly by issuers, through the floatation of some new major companies. The main Bucharest Stock Exchange drawbacks will not vanish with integration, brokers say.
EU integration can make a difference for the Romanian economy, but the immediate effects of accession will not be major ones, analysts say. The process of economy modernisation and efficiency boosting will be slower, with the moment of integration being a mere impetus in this regard.
In terms of foreign investments, these will be enhanced by integration, but we "mustn't expect year 2007 to bring bigger investments than this year's," says Radu Craciun, chief analyst with ABN Amro Romania. Instead, portfolio investments should go up, as the amount of these investments in economy is quite small, says Craciun.
"The transfer from foreign direct investment to portfolio investment will not happen over night. Most direct investment will come amid the expansion of foreign firms already operating on the market," says Florin Catu, chief-economist with ING Bank Romania.
In terms of negative effects of integration, both analysts cite the additional pressure on inflation. Craciun says integration is also likely to put pressure on Romania's budgetary policy and "we may find ourselves in the situation where we'd have to widen the budgetary deficit (...)."
EU accession
Will boost economic growth and foreign investments, with the concrete benefits to show up on a longer term, though
Direct investments will be replaced by portfolio investments amid financial instrument diversification
Will bring a wave of price increases that analysts forecast as moderate, though
Will also bring exchange rate volatility, but the domestic currency will not grow at an accelerated pace
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