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Romania, an emerging economy

suffering like a developed one

Florin CituJune 2012 Bucharest Romania

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Until 2007 both private and public sectorincreased deficits. It was a race to the bottom.

After 2007 only public sector increased deficits,implicitly debt, in part transferred from theprivate sector.

The private sector was not allowed to correct due

to fear of social unrest and loss of political votes. After 5 years, we are left with massive public debt

and a private sector that still needs to berestructured.

The story

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The global growth story

F L O R I N C I T U A D V I S O R Y

-6

-4

-2

0

2

4

6

8

10

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

World European Union

United States Emerging and developing economies

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C/A balance as % of GDP

F L O R I N C I T U A D V I S O R Y

-8

-6

-4

-2

0

2

4

6

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

European Union Emerging and developing economies United States

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Unemployment

Public debt

Future growth

What is the problem then?

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Public Debt

F L O R I N C I T U A D V I S O R Y

0

20

40

60

80

100

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Euro area Emerging and developing economies

Developing Asia ASEAN-5

Latin America and the Caribbean Middle East and North Africa

Sub-Saharan Africa United States

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World growth influenced by developed

economies

Inflation by emerging economies

Future growth hampered by high public debt

in developed economies What next for Romania?

Summary

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Real GDP, Romania falls harder than

EM countries

F L O R I N C I T U A D V I S O R Y

-8

-6

-4

-2

0

2

4

6

8

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Romania Emerging and developing economies Euro area

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C/A balance, explains part of the fall in

Romanian GDP

F L O R I N C I T U A D V I S O R Y

-15

-10

-5

0

5

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Romania Emerging and developing economies

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Here is the first problem for Romania

RO- exports, EU- Imports

F L O R I N C I T U A D V I S O R Y

-15

-10

-5

0

5

10

15

20

25

30

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Euro area

Romania

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The second problem

F L O R I N C I T U A D V I S O R Y

0

5

10

15

20

25

30

2012May

2011Dec

2011Jul

2011Feb

2010Sep

2010Apr

2009Nov

2009Jun

2009Jan

2008Aug

2008Mar

2007Oct

2007May

2006Dec

2006Jul

2006Feb

2005Sep

2005Apr

2004Nov

2004Jun

2004Jan

2003Aug

2003Mar

2002Oct

2002May

2001Dec

2001Jul

2001Feb

2000Sep

2000Apr

1999Nov

1999Jun

1999Jan

1998Aug

1998Mar

1997Oct

1997May

1996Dec

1996Jul

1996Feb

1995Sep

1995Apr

1994Nov

1994Jun

1994Jan

1993Aug

1993Mar

Austria Belgium Cyprus Germany Spain

Finland France Greece (GR) Ireland Italy

Luxembourg Malta Netherlands Portugal Slovenia

Perioda responsabila pentru criza de astazi.

Tari cu economii nerestructurate au avut parte

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And this is the third

EU unemployment and gross debt

F L O R I N C I T U A D V I S O R Y

6

6.5

7

7.5

8

8.5

9

9.5

10

10.5

60

65

70

75

80

85

90

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

General government gross debt

Unemployment rate

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F L O R I N C I T U A D V I S O R Y

F L O R I N C I T U A D V I S O R YAn Indepndent Advisory And Consulting Company

Bucharest, Romania

email:office@macroinvestadvisory.com

Telephone: +40727642085