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May 22, 2022

Nothing is certain

2010 is a year of uncertainty. What seems to be certain gets overshadowed by doubts more and more. This is why most developments should be taken with a pinch of salt. Encouraging economic recovery signs – officials tell us. Public debt dropped by 2.8 per cent in January. Some sectors report revival, exports are slowly getting back on their feet, the RON/EUR exchange rate has an ascending trend (maybe too vigorous given the current economic level), banks are sitting on a pile of money and have a hard time placing liquidities because of widespread market distrust. What’s certain is that there is money. In other words, we should feel reassured. However, negative signals are also present.

Unemployment reached 8.3 per cent (in official numbers) but real figures probably go well beyond 10 per cent. A growing number of activity sectors are facing a precarious situation and continue to consider massive layoffs. The state delays VAT and debt payments to private companies and delays gradually lead to economic and financial blockage. There are rumours many businesspeople are planning on registering their companies in Bulgaria, precisely because in the neighbouring country, the state pays its debts quicker and VAT is only 10 per cent. The number of companies that get dissolved continues to grow in 2010. On the other hand, there is a growing rate of people who default on paying back their bank loans. Real estate market is almost blocked. Completed apartments are waiting for buyers, who never show up. As for the social situation, we can say that we’re truly sitting on a powder keg, since most trade unions are seriously ‘training’ for street protests and ceasing activity. So, nothing is certain and the statement that economy will start growing this year can still find many critics, with many counter-arguments.

The central bank’s reference exchange rate has been going up lately, but the appreciation is unlikely to make everybody happy. Even governor Mugur Isarescu said recently that the fears he voiced last year, that national currency might be depreciating too much, are now turning into fears of excessive appreciation. Exporters are not very pleased with the trend either. And the development in itself is connected to a solid increase in currency reserves, based on the loan instalments received from the IMF. Could this be a step towards a more moderate pace of price increase? Nothing is certain in this respect either, given the upcoming price hike in natural gas, higher electricity tariffs and an increase in other taxes. As for fuel prices’ ascending trend, it has already drawn attention from businesspeople’s association, which was surprised to see that we pay the same amounts for gas as in 2008, only that at the time oil was sold for about USD 140 per barrel, while now it is sold for USD 80 dollars. If we cannot feel any improvements when national currency is appreciating, the situation will certainly get more difficult when the currency starts depreciating.

President Traian Basescu last week signed the Nabucco project accord, sealed in Ankara in 2009, and demanded parties to step up ratification procedures in Parliament. As if the project is delayed because of Romania, which has always been a constant supporter. This project is not certain either or, in other words, it is getting growingly uncertain. Signatory countries are more reluctant in starting investments given the current economic crisis and the temptation of the project’s main competitor, South Stream, but also because of Russian pressure. Therefore, Nabucco is still just a piece of paper.

Economy Minister Adriean Videanu promised us earlier this year that negotiations would begin with Gazprom officials for direct deliveries to Romania, without intermediaries. We are waiting for the meeting scheduled on March 24. But until then, rumour has it that this is an initiative for some time in the future, not for immediate application. It remains to be seen how certain Videanu’s promise is. What’s certain is that Minister Videanu doesn’t have too much trust in international crediting institutions, such as the European Bank for Reconstruction and Development (EBRD). Which is in fact on of the most important investors in Romania. So Videanu recently said that EBRD’s chief economist for South-Eastern Europe, Peter Sanfey, “is not familiar with Romanian realities.” The comment came soon after Sanfey commended that “stimulus included in the EUR 13 bln fund programme announced by the Romanian government in February 2009 to support economy were rather imaginary than real so far,” a straightforward criticism of Emil Boc government’s economic behaviour. We are certain the statement above is correct. What we are not sure of is whether Mr. Videanu is really familiar with Romanian realities.

Will we get a budget rectification soon? Some sources say the Finance Ministry is preparing a budget recalculation in April, when the IMF delegation is expected, to analyse whether the country met the targets set at the beginning of the year. “We must reduce expenses in order to keep to the incomes forecast for 2010 first quarter and it’s possible that health care and education budgets get more money for salaries,” these sources said. Finance Minister Sebastian Vladescu avoided giving a clear answer to this question. However, Prime Minister Boc, in Iasi last week, categorically denied the alternative: “We have no intention to do a budget rectification for the time being.” Like I said, nothing I certain…

In a world and a time so uncertain, talking about the certainty of tomorrow becomes an aphorism. No wonder, then, that unions are getting more concerned with keeping jobs and employee income levels. Since the government is striving to carry out restructurings (not too successful at it, to be honest) and to cut expenses, negative effects are directly and indirectly supported by tax-paying citizens. We are sure, however, that the executive will announce a new victory after the upcoming visit of IMF representatives, which will stimulate the government’s imagination. We are not certain however whether citizens will feel so relaxed as well.

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