The ratings on the Republic of Romania are supported by its low public sector debt burden; the reform anchor provided by impending EU membership, expected in 2007; and the economy's high growth potential. These strengths are offset by low prosperity, the government's limited short-term budgetary flexibility, and a gradual weakening of external liquidity indicators. EU entry on Jan. 1, 2007, will support the ratings by locking in past reforms, and provide a framework for further growth- and investment-enhancing economic and institutional modernization. Driven first and foremost by dynamic investment, we expect trend GDP growth of 5.0%-5.5% over the medium term to enable sustained income convergence, taking per capita incomes above $9,000 by the end of the current decade. Despite likely
