Abstract
The recent Romanian parliamentary elections, held on November 30 2008, were
fiercely contested by the
two opposition parties, the Democrat Liberal
Party (PD-L) and the Social Democrat party (PSD). The PDL
with 166 seats
and PSD with 163, have formed a coalition government after lengthy and
tense
negotiations. Emil Boc of the PD-L is Prime Minister, with PSD' s Dan
Nica his deputy. The
government' s first months have been turbulent.
President Traian Basescu had nominated Theodor
Stolojan (PD-L) as prime
minister on December 10, but the following day Stolojan renounced the
position saying that younger politicians should step forward. Boc, 42, was
nominated by the president
later the same day. The government has already
had three different interior ministers. In late February, the
government
passed a budget focussing on public works spending to cushion the economy from
the global
financial crisis, and is pursuing aid options from the EU and
IMF. We believe the Democrat Liberal led
government is the most attractive
option for ensuring Romania' s long-term political stability and
economic
growth. Not only did the party campaign on implementing the raft of
anti-corruption reforms
which have been advocated by the European Union,
but it is also the most committed on pushing ahead
with Romania' s
convergence to EU norms. In addition, a Democratic Liberal party government
will lead
to a change in the style of Romanian politics, as it will
substantially reduce the friction between the
legislature and the
executive. The two branches of power will no longer be forced to cohabit, but
will be
able to work together. This is likely to speed up reforms and lead
to a more harmonised approach to
policy making.
The Romanian defence
industry will continue on its restructuring and privatisation programme.
Having
seen dramatic redundancies in the recent past, including the loss
of 61% of the workforce between 2002
and 2003, the period will witness a
further reduction within the Romanian defence industry. However, the
losses should level out towards the end of the forecast period. The
long-planned privatisation seems to be
underway and the Romanian Ministry
of Economy and Commerce is receiving offers for the RomArm
group of
companies. Arms imports will increase during the period as Romania seeks to
make the armed
forces more efficient through the procurement of new
systems, such as the C-130 Hercules. At the same
time, exports will
generally rise as Romania attempts to return to being a large player on the
international
market. In summary, the period will witness the Romanian
defence industry hasten its transition from
centrally planned to market
industry (as the sector is set to be privatised) some time near the back-end
of
the forecast period.
In recent developments, the interior
ministries of Serbia, Bulgaria and Romania signed a protocol in
September
2008 on the joint fight against crime. The protocol is designed to improve
police cooperation
in the fight against crime, which is necessary since
the security risks which the three countries face are
inter-connected. The
protocol will particularly extend to cooperation in the fight against
cross-border
crime, drug smuggling, money counterfeiting, illegal
migration and economic crime, and, above all, the
smuggling of excise
goods, such as cigarettes and oil. In January 2009, Romanian Air Force
chief
Constantin Croitoru and several other senior staff were dismissed in
connection with an arms theft.
Although this signals lingering corruption
and organised crime, it also demonstrates that the new
government is
responding to it decisively.
Following the latest data release from the
Romanian National Institute of Statistics, we have revised our
2008 and
2009 economic growth forecasts for Romania to 7.8% and 5.3% (from 5.6% and
5.1%),
respectively. While we expect growth to slow over our five-year
forecast period, we nevertheless
anticipate that it will remain fairly
robust, averaging 5.8% through to 2012.
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