Romania's public debt continued to rise last year at a fast pace of 31.6%, amid massive state borrowing, and reached 194 billion RON (46 billion euros), accounting for 38% of GDP. "The growth rate of the public debt is significant. And its level has neared 40% of GDP. The situation is made worse by the fact that the debt structure has a big short-term component, which is more volatile. A problem we will have to solve is modification of the debt structure by extending loan deadlines," comments Aurelian Dochia. Can Romania function without further boosting its public debt? "The public debt is expected to stabilise. Now it is not small at all. We are nearing the maximum bearable limit. The important thing is to think why we are taking this debt on. If we boost the debt to finance wage and pension spending, the markets can become nervous. If we build motorways, it is not a tragedy," believes IonuĊ£ Dumitru, chief economist of Raiffeisen Bank. The Finance Ministry has managed to slightly reduce the budget deficit last year, but the fast rate of growth of the public debt and the weak prospects of economic growth remain the main vulnerabilities.(Z.F.)
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Raiffeisen Bank analysts believe households' falling consumption expenses hurt GDP the most in the last quarter of 2010. However, Raiffeisen is counting on positive effects on the side of industrial production, narrowing external deficit and rising government expenditures, so that it "bets" on an economic decline near zero.
EBRD economists are much more downbeat, forecasting a 1.8% annual drop (the worst performance in the region) and a 0.5% quarter-to-quarter decline.
The National Statistics Institute is due to publish tomorrow the first estimates on GDP trend in Q4, 2010. For the entire 2010, GDP is expected to have contracted by around 2%
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