EME Macro/Strategy: Romania – once again, the most compelling growth story

We have deepened our analysis of Romania’s GDP growth potential and energy vulnerability outlook, and our assessment is broadly positive on both issues. The country’s GDP growth potential should remain strong in the coming years, at around 4% in real terms, supported by continuing gains in productivity and investment. Energy supplies are diversified, which puts Romania in a better position relative to many of its EU peers in terms of the resiliency of energy supply and the impact on the current account. Above all, we reiterate our view that Romania is among the few countries that will see broad continuity in average inflation and the interest rate levels in the coming years relative to the recent decade. This is thanks to its steady institutional and political outlook, coupled with sizeable productivity gains ahead. In contrast, we see many developed and developing countries entering a dangerous self-reinforcing path of higher inflation, weakening institutional checks and balances, and the inevitable eventual and plausibly large erosion of currency value that this will bring.