In an exclusive interview for Hotnews.ro, London analyst Alice Mummery, working with Business Monitor International, has pessimistic prognosis about the future of the Romanian economy and estimates that the future government will be forced to adopt unpopular measures.

HotNews.ro: The State Budget law approved yesterday by the Romanian Government is almost identical with the one for 2008, estimating a 6% growth in 2009, an inflation rate of 4.5% and the exchange rate for euro at 3,6 lei. Do you think that such a budget is sustainable in the conditions of the international financial crisis? What should we expect in 2009 in Romania, which crisis effects will be felt here?

Alice Mummery: We believe the medium-term outlook for the Romanian economy is negative. The continued slowdown of economic growth in the eurozone in 2009 will significantly weigh on demand for Romanian exports. In addition, the tightening of global credit means that we are likely to see a sizeable reduction of capital inflows into Romania which will lead to a substantial slowdown in both investment and loans. Thus, Romania is likely to find it increasingly difficult to finance its current account deficit - which significantly adds to the risk of a depreciation of RON/EUR.

Going forward, given the increasing risk to the Romanian economy, we believe that the Romanian government’s projections for 2009 are over optimistic. Indeed, Business Monitor International forecasts growth to slow to 3.1%, inflation is expected to slow to 3.1% y-o-y in December next year as domestic demand essentially collapses. In addition, we expect downside pressures on the lei to remain and forecast an exchange rate on RON3.9000/EUR for the unit.

HotNews.ro: Which should be the taxation policy of the Romanian Government for 2009?

Alice Mummery: While we do not provide opinion