However, the September article remarks that despite growth of 7.7% in 2006 and an average annual rate of 6.0% between 2001 and 2006, "the country has a lot of ground to catch up" after the political turmoil and misguided development strategy of the 1980s.
Klett believes that the economic upturn since 2000 is driven by domestic demand, with the double-figure annual growth in investment reflecting "the enormous modernisation needed in Romania".
Moreover, the population's growing affluence has been boosting private consumption, with more Romanians opting to buy on credit. The credit boom has "markedly increased the risk of widespread defaults", although the heightened vulnerability of the country's banking system is cushioned by the fact that foreign-owned financial institutions can rely on the support of their western parents, says the author.
Klett warns that the influx of imports caused by the investment and consumption boom has led to a rising current account deficit, hitting double digits in 2006. He predicts that it will reach 15% in 2008, hampering "hitherto very successful" efforts to control inflation.
The author claims Romania is having difficulty fulfilling all the requirements of the EU's acquis communautaire (a "body of rights and obligations valid for all member states"), with the Commission highlighting "serious deficiencies in fighting corruption".
Another weak point is the "unstable political situation". The author insists that "it is urgently necessary for the outstanding reforms to be addressed as speedily as possible" or there is a risk that the Commission will cut the country's structural funding.
Romania will rely more strongly on international capital markets to finance its current account deficits in 2007 and 2008, predicts Klett, especially as the government's economic policy "does not contain any effective measures" to reduce it.
He also thinks the currency (the leu) is undervalued, and that its appreciation against the euro will continue "for some time".
Klett concludes that with no restrictions on the movement of capital between Romania and its EU partners, low labour costs, 22 million consumers, and competitive rates of taxation, the country is an attractive place for investors.
He cites the construction, engineering, automobile, chemical and pharmaceuticals, energy, insurance, IT and tourism sectors as the most attractive for direct investment.
