Core Views
Record demand for Romanian exports is catalysing robust expansion in Romania’s manufacturing and industrial sectors. We expect these dynamics to see Romania’s economy return to growth in 2011, accelerating thereafter.
Romanian inflation remains elevated and well above the central bank’s target. Despite this, we expect the National Bank of Romania’s benchmark interest rate to remain unchanged through to end-2011. While we expect the coalition government to remain resilient in the face of public protest and parliamentary no-confidence votes, we believe it will most likely be unseated in the 2012 parliamentary election – which we expect to result in a Social Liberal Union government.
Major Forecast Changes
We have adjusted our end-2011 monetary policy interest rate forecast from 6.00% to 6.25%. We therefore expect the National Bank of Romania to maintain its current policy rate throughout the whole of 2011. We have made this change due to higher inflationary pressures resulting from a move up in global food and oil prices.
Key Risks To Outlook
Upside Risk To Inflation Forecast: Unrest in the Middle East and North Africa region has resulted in a sharp move higher in oil prices. While we currently forecast oil prices to moderate (from above US $110/bbl for Brent) through H211 on account of ample spare OPEC capacity, we acknowledge the risk that supply disruption beyond Libya would likely keep prices elevated for a prolonged period, pushing up Romanian inflation in 2011.

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Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Ratings 7
Domestic Politics 8
Government Heading For 2012 Defeat
Despite public discontent with the fiscal austerity and economic reform being implemented by the coalition
government, we do not expect a political crisis to befall Romania in 2011
TABLE: Political Ov erview 8
Chapter 2: Economic Outlook 11
SWOT Analysis 11
BMI Economic Risk Ratings 11
Economic Activity 12
Export Strength To Catalyse 2011 Recovery
We forecast the Romanian economy to emerge from its two-year-long recession in 2011 and make a steady
return to growth
TABLE: GDP BY EXPEN DITURE 12
Monetary Policy 14
Rates On Hold In 2011
Despite the fact that Romania suffers the highest inflation rate in the entire EU , we do not expect to see a policy
response from the National Bank of Romania
TABLE: ROMANIA – MONETARY POLICY 14
Balance Of Payments 15
C/A Deficit To Remain In Check
Romania is unlikely to see its current account deficit balloon to the unsustainable levels seen prior to the global
financial crisis, as its economy rebalances away from external credit-led consumption and towards exports
TABLE: CURRENT ACCOUNT 16
Exchange Rate Policy 17
Leu To Gradually Appreciate
We forecast the Romanian leu to gradually appreciate over the course of 2011, rising to RON 407/EUR by the
end of the year
TABLE: EXCHAN GE RATE 18
Regional Banking Sector 19
Improved Banking Outlook As Economic Growth Firms
Regional Monetary Policy 20
Oil: Shock But No Awe
The unprecedented political crisis in the Middle East and North Africa has caught European policymakers off guard
Chapter 3: 10-Year Forecast 25
The Romanian Economy To 2020 25
Economic Outlook Still Bright Over Long Term
Despite taking a heavy blow in 2009 on the back of the global economic downturn, we believe the outlook for
the Romanian economy remains fairly bright over the longer term
TABLE: ROMANIA Long-Term Macroeconomic Forecasts 25
Chapter 4: Business Environment 29
SWOT Analysis 29
BMI Business Environment Risk Ratings 29
Business Environment Outlook 30
Institutions 30
TABLE: BMI Business And Operation Risk Ratings 30
TABLE: BMI Legal Framework Rating 31
Infrastructure 32
TABLE: Labour Force Quality 33
Market Orientation 34
TABLE: Emerging Europe – Annual FDI Infl ows 34
TABLE: Trade And Investment Ratings 35
Operational Risk 36
TABLE: TOP EXPORT DESTINATIONS 36
Chapter 5: Key Sectors 37
Telecommunications 37
TABLE: Internet – Historical Data And Forecasts 37
TABLE: Fixed Line – Historical Data And Forecasts 38
TABLE: Mobile – Historical Data & Forecasts 38
Defence & Security 39
TABLE: Romanian Army Personnel, 2004-2008 (‘000) 40
TABLE: Romanian Government Defence Ex penditure, 2008-2015 41
TABLE: Food and Drink Sector Key Indicators 42
TABLE: Infrastructure Sector Key Indicators 43
TABLE: Autos Sector Key Indicators 43
TABLE: ROMANIA Oil and Gas Sector Key Indicators 43
TABLE: PHARMACEUTUICALS Sector Key Indicators 43
TABLE: FREI GHT SECTOR KEY IN DICATORS 44
Chapter 6: BMI Global Assumptions 45
Global Outlook 45
Oil Risks
TABLE: Global Assumptions 45
TABLE: GLOBAL & RE GIONA L REA L GDP GRO WTH % CHG Y-O-Y 46
TABLE: CONSENSUS FORECASTS 46
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