Romania, Kazakhstan Are Attractive on Low Debt, RenCap Says

May 11. Bloomberg

By Andra Timu and Irina Savu

Romania, Kazakhstan Are Attractive on Low Debt, RenCap SaysRomania and Kazakhstan will be the most-attractive emerging markets for investment in the next four years as their economies grow amid low debt levels, according to Renaissance Capital.

The two former communist countries, which went through “harsh economic crashes’’ in 2009, have low debt-to-gross domestic product ratios and may see strong output growth between 2012 and 2015, Renaissance’s Global Chief Economist Charles Robertson said in an e-mailed note to clients today.

Romania’s “combined public and private-sector debt total of as much as 80 percent of GDP in the next two years will be less than Poland, half that of Hungary and dramatically better than the 240 percent ratios in Spain, Portugal or Greece,’’ Robertson said. “With a small current-account deficit as well, Romania will look like one of the safest credits in Europe.’’

Romania’s economy is poised to recover from a two-year recession and grow 1.5 percent this year and as much as 4 percent next year, according to the International Monetary Fund. Kazakhstan increased its economic growth forecast to 7 percent this year and 6.9 percent in 2012, Economic Development and Trade Minister Kairat Kelimbetov said yesterday.

The Romanian economy will grow 1.6 percent this year and 5.1 percent next year, Renaissance forecast, while the budget deficit will shrink to 4 percent of GDP in 2012 from 5 percent this year, exceeding the government’s target of 3 percent.

Oil Prices

Kazakhstan’s economy may expand 6.2 percent this year and 7 percent in 2012 as the price of oil could rise to $110 per barrel, according to Renaissance. The Central Asian nation’s budget will post a surplus of 0.5 percent of GDP and the current-account surplus will probably be 3.5 percent of GDP.

“These numbers are quite different from Romania because Kazakhstan does so well from oil,’’ Robertson said in an e- mailed response to questions from Bloomberg. “The similarity between the two countries is the attitude of the retail sector to borrowing.”  In both cases, retail borrowing is very low after booming between 2005 and 2007, and is not showing any signs of a strong recovery, he said.

The Bucharest-based government has embarked on a budget austerity program to reassure investors it will maintain fiscal discipline ahead of general elections in 2012. Romania had the 27-nation bloc’s fourth-lowest ratio of public debt to GDP at 30.8 percent last year, after Estonia, Bulgaria and Luxemburg, according to the European Statistics Office.

The ratio is expected to rise to 33.5 percent this year and 34.8 percent next year, according to Renaissance. Kazakhstan’s debt to GDP ratio will probably reach 80 percent this year and 85 percent next year.