Some imbalances, but not very severe (yet)
After many years of seemingly unabated real GDP growth and virtually no political or currency concerns, the situation has started to become seemingly more frail since last year, and there is no sign of a turnaround. In our view, Romania is taking steps backwards, after the many improvements achieved after the balance of payment and fiscal crisis of 2008. However, the extent of the imbalances remains contained; thus, we see these changes as noteworthy, but not a cause of immediate alarm.
We have updated our models for the RON and the local sovereign bond yields (10-year), and both signal that current valuations are reasonably in line with fundamentals.
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