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Romania's economy still attractive, but more volatile in 2019 - Fondul Proprietatea

Romania's economy still attractive, but more volatile in 2019 - Fondul Proprietatea Johan Meyer - Lead Portfolio of Fondul Proprietatea

BUCHAREST (Romania), January 22 (SeeNews) - Romania remains an attractive investment destination in 2019, with the economic landscape still fertile, while significantly more volatile compared to last year, the portfolio manager of investment fund Fondul Proprietatea [BSE:FP] said on Tuesday.

"There is much potential to be tapped into, but it is crucial for the Government and lawmakers to foster a predictable, legally-stable environment that encourages and facilitates investments, in addition to carrying out sound economic policies engineered for a longer-term horizon," Franklin Templeton Investments Limited CEO and portfolio manager of Fondul Proprietatea, Johan Meyer, said in an outlook on Romania's economy in 2019.

According to Meyer, 2019 will bring along a decrease in private consumption growth, moderate inflation, low unemployment, as well as upward pressure on interest rates.

This year is also set to be the playing field for a host of rising imbalances in Romania – widened current account deficit and budget deficit, as well as rise of inflation, which should be tackled however in a transparent and consistent way.

"While the macro-economic indicators are still likely to be sound, much of their evolution depends on the Romanian State’s capacity to attract, facilitate and manage investments, as the need for inflows of investments – including via EU funds absorption – will become more pronounced," Meyer said.

Fondul Proprietatea also believes that 2019 will mark a downwards trend for consumer sector, as well as further upward movement of interest rates, in order to ensure that inflation remains under control.

Therefore, it estimates a moderate level of inflation of 3-4%.

Romania's annual consumer price inflation decelerated to 3.27% in December from 3.43% in the previous month, national statistical office data showed.

Among the top sectors and trends to watch out for in 2019 are energy and banking, Fondul Proprietatea said, referring to the way they will be affected by the recent fiscal changes enforced by the government through an emergency decree in December.

The fund's expectations regarding the energy sector have changed following the adoption of the emergency decree.

"While we had initially been quite optimistic regarding its potential for job creation and contribution to State revenues on the long-term, the capping of gas and energy prices and new taxation regime, but also potentially put the country’s energy independence at severe risk," Meyer said.

The banking sector has been hit hard, too, the CEO noted, as the recently introduced tax on bank might backfire, creating a snowball effect for the entire economy, especially on the background of growing macroeconomic imbalances which call for prudent, market-friendly fiscal policies.

"In fact, with such a measure, Romania inexplicably inflicts pain on itself and it is regular citizens who will probably have to pick up the bill eventually."

In this complex context, it is crucial for Romania to foster an environment where companies are confident to invest in businesses on the long-term, so that they continue generating income for the state in a sustainable way though dividends and taxes on profits, Meyer stressed.

Fondul Proprietatea's shares traded unchanged at 0.8259 lei on Tuesday at 1209 CET on the BVB.

(1 euro = 4.7081 lei)