Structural reforms will continue next year, but will proceed much slower, without significant stakes involved, as the government will most likely focus on the electoral year and elections. This was one of the most important messages conveyed by Governor Mugur Isarescu to the foreign bankers and investors attending the "Banking on Romania" conference organised by British publication The Banker and Banca Comerciala Romana (Romanian Commercial Bank - BCR) in London last week.
"It is rather difficult to conduct reform in an electoral year when most of the government's attention will be directed to elections. The increase in gas prices and the restructuring of the energy sector are key elements in this process, but they will be hard to implement, at least during the winter," Isarescu said.
He mentioned attracting investments would remain one of the government's concerns next year, as Romania was lagging behind in this regard every year.
"It takes two to tango," Isarescu said, adding that, if no major investors came in Romania, the FDI target would be hard to attain. The authorities in Bucharest have set nearly 1.7bn euros as the foreign direct investment target for 2004, a level comparable to the one in 2003. The foreign investments were expected to amount to 1.8bn euros this year, but the figures now show anything above 1.2bn euros will be highly unlikely to attain.
Isarescu was recently saying more or less jokingly, "we seem to do something to scare investors away almost every year. We never manage to cover any more than 60% of what we intend to, not even in the best case."
Coincidentally or not, the NBR Governor was mentioning Romania's foreign investment problems in London, as England does not have a 100% held investment in Romania. This goes for a few other European countries, as well. The fact that the foreign investment trend over the last few years is not the only thing the Romanian authorities worry about is no longer a secret. Isarescu again voiced concerns about the economic slippages Romania was facing at the end of this year and warned again that the foreign deficit stood every chance of not dropping below 6% of GDP next year, either.
The significant increase in domestic demand in the last twelve months, which was not matched by a similar rise in production and had to be covered by a substantial import intake, has visibly deteriorated the trade balance. And this is a long-term effect. It remains to be seen what happens next because, although the Cabinet has pledged to promote steps to narrow the gap between net outflows and inflows, 2004 is rather more electoral in nature than a year of sacrifice.
oana.nuta@zf.ro
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