Mugur Isărescu: The investment opportunities in Romania defy the imagination

Romania has more opportunities for investors than we can imagine, said Mugur Isărescu, the governor of the Romanian Central Bank said yesterday, addressing the businesspeople present at the "Forum Gulf Cooperation Council - Romania:

Business opportunities in Central and South-Eastern Europe", organized by Forum Invest.

Unfortunately, we are not good at exploiting them ourselves or at finishing what we start. According to the governor of the NBR, Romania does not necessarily need money, but rather it needs entrepreneurs, viable projects and people that would see them through: "We are a country that has many unfinished projects. 40,000 projects funded by the state budget lie unfinished. In my opinion, that about says it all".

He said that Romania needs a stable and healthy economy, ready to return to growth.

"Romania"s economy has currently stabilized and is ready for a new cycle of sustainable growth, one which we wish to last longer and rely on factors that will not create imbalances like it did in the past, but rather reduce them", said the Governor of the NBR.

Mugur Isărescu said that Romania"s foreign deficit dropped from 12-14% in 2007-2008, to around 4-5% of the GDP, and said he hopes it will remain around this level. According to the governor, this is a deficit that can be financed through direct foreign investments, compounded by the absorption of European grants, which is rather modest currently.

"The next cycle of economic growth needs to be based on the stimulation of manufacturing, in order to maintain this positive gap which we had over the last two years", said the Governor, who added that the risk of the imbalances reappearing again was very small, subject however to the correct economic policies.

The Romanian Central Bank predicts an economic growth of 1.5% in 2011 and 4-5% in 2012.

• Inflation below 4%

More than half of last year"s inflation (8%) is the result of taxation, caused by the raise of the excises and of the VAT, Mugur Isărescu said yesterday, who said that he expects the rate of inflation to fall below 4% at the end of 2011: ""In Romania, inflation has a structural component and is very slow to decrease. The economy has opened and has the tendency of taking on all the negative elements from the outside and to transpose them here. It"s a bit harder with the good factors, when it comes to assimilating those we have inertia".

The NBR will have a difficult mission when it comes to keeping inflation under control this year, as Mr. Isărescu said there are two unknowns involved: the increase in the price of foods and the evolution of the price of oil.

" A continued increase in the price of oil will lead to more inflationary pressure. I am betting on the fact that Saudi Arabia has supplementary oil capacities three times higher than those of Libya and that it will activate them. Thus, there is a chance of the price of oil going below 100 dollars/barrel, perhaps towards 80 dollars if this proves the equilibrium price", Isărescu added.

The NBR governor added that the excuse of raising the price of fuel due to the exchange rate is no longer valid, because since the beginning of the year the leu has gained 7% compared to the dollar.

Since the beginning of the year, oil companies have raised the price of fuel six times, and prices have increased by about 3.5% on average. In most cases, companies blame these price increases on the evolution of the international price of oil and on competition on the domestic market.

According to data from the National Statistics Institute (INS), last year fuel prices increased more than 15%, after being raised 13% in 2009.

The Economic Forum "The Gulf Cooperation Council - Romania - Bucharest: Business Opportunities in Central And South Eastern Europe was organized by the Ministry of Foreign Affairs (MAE), in cooperation with the Ministry of the Economy, Trade and Business Environment (MECMA), The General Secretariat of the Gulf Cooperation Council (CCG) and under the high patronage of the Romanian presidency, between March 8th and March 10th, in Bucharest.