Erste: Political crisis in Turkey leads to direct risks in the Romanian economy


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The political crisis in Turkey exerts direct economic risks in the Romanian economy, but the turbulences in international financial markets have not been felt locally. The reaction of investors in Central and Eastern European countries to the crisis in Turkey will be a differentiated one from country to country, Erste Bank economists say in an analysis, informs.

Erste considers that the impact on Central and Eastern Europe of the failed putsch will be more political. Turkey was in 2015 Romania’s sixth largest export destination with deliveries of goods worth EUR 2.2 billion, equivalent to 1.3 percent of GDP.

Foreign direct investment in Romania from Turkey amounted to EUR 508 million in 2014, but business relations between the two countries are broader than that, given that many Turkish companies are incorporated in the European Union.

Erste also notes that the national currency ignored the effect of the attempted coup d’etat in Turkey rising last Thursday to 4,455 units per euro, the highest level in nearly three months.

“Internal political stability before the November elections, played a role in this regard”, Erste analysts said, who anticipate that the Romanian Leu will reach 4.51 units per euro in December 2016 and 4.5 units per euro in December 2017, risks arising from the deterioration of current account balance level.

Erste analysis refers also to the fact that Fitch downgraded Romania’s long-term debt in lei from BBB to BBB-, the same as the qualifier for foreign currency long-term debt with a stable outlook.

In this context, Erste warns that Romania’s ratings could be jeopardized in the coming quarters if the new government resulting from the elections will not take decisive measures to keep the budget deficit under control.

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