Investments remain the major issue in Romania’s economic growth, warns Isarescu

The central bank governor, Mugur Isarescu, said on Thursday that Romania needs to rely on foreign capital for investments as the domestic one has vanished, while the country’s low savings rate is also a challenge.

The governor added that Romania is still dependent on foreign investment but he doesn’t believe that the country can attract too many investments in its portfolio.

“The internal investments are limited and we don’t have the mechanism to stimulate savings or accumulation too much, because consumption would go down,” said Isarescu, quoted by Agerpres newswire. “Productivity and job creation depend on investments. I believe that direct investments in non-productive sectors have reached a limit.”

Foreign direct investments (FDI) in Romania amounted to EUR 425 million in the first quarter of this year, falling by 4.4 percent from the similar period of last year, according to the National Bank of Romania (NBR).  The country attracted EUR 1.9 billion in FDI last year.

Meanwhile, the deposits of residents in Romania climbed by 10.3 percent y/y to RON 193 billion this May, according to the NBR. This includes bank deposits in domestic and foreign currency.

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The governor said that Romania can’t boost the economy based on exports through the depreciation of the domestic currency RON.

“If you want the depreciation to lead to economic growth through exports you need to take into account the structure of the economy. I don’t see this situation in Romania”

The RON/EUR climbed above the 4.5 this week, due to a difficult situation in the Euro zone and the domestic political instability. The RON/EUR stood at 4.5252 on Thursday, close to the historic low of 4.5275 registered on Monday.

The Romanian economy will grow by 1.5 percent of GDP, according to the IMF. Meanwhile, the European Commission estimates the economy will gain 1.4 percent.

Ovidiu Posirca