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Monday, September 1, 2008

Romania's Economic Growth Accelerates In Q2 2008

Romania's economy grew faster than generally expected in the second quarter, fuelled by a lending boom, increased investment and rising wages. The economic expansion accelerated to an annual 9.3 percent from 8.2 percent in the first quarter, according to preliminary data out today from the Bucharest-based National Statistics Institute.

Net wages were up 24.4 percent in June, while annual private debt was up 65%. As a result domestic investment grew in the second quarter by 30 percent from the same period last year - and reached 6.5 billion lei ($2.7 billion) - led by a 35 percent increase in construction. Central bank Governor Mugur Isarescu forecast 9 percent growth for 2008 last month, and warned the economy is "overheating" with upward pressure on inflation and a deteriorating current-account deficit.

To try to restrain domestic deman the central bank raised its main interest rate to 10.25 percent in July, the highest in the EU, as the inflation rate rose to a three-year high of 9 percent.

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