Lazar, MFP: We can sense a reinvigoration, but not in the budget; agriculture still not fiscalised.
Romanian economy grew by 1.9 per cent in the third quarter as compared to the previous quarter and marked a 4.4 per cent gross year-on-year rise, posting the highest growth in the last three years, according to the initial estimations by the National Statistics Institute (INS). The seasonally adjusted growth compared to Q3 of 2010 was by 4.5 per cent.
In the first nine months of the year the economy recorded a gross growth of 2.7 per cent compared to the similar period of 2010 and 2.6 per cent seasonally adjusted growth. Finance Ministry (MFP) Secretary of State Dan Lazar said the GDP growth registered in Q3 had been primarily supported by the growth of agriculture, but the ‘reinvigoration’ of the economy was not visible in tax collection figures because the sector of agriculture is not fiscalised, Mediafax reports.
‘If things continue down the same line, I expect the 1.5 per cent economic growth forecast for 2012 will be exceeded,’ Lazar said told a seminar. ‘One of the most important engines was agriculture, assisted by construction, tourism and industry where we registered a growth of export. Everybody expected the export to start declining, but you’ve helped us,’ Lazar said, referring to the businessmen in the audience.
Do not base your projections on this pace, economists warn
The above expectation economic growth in Q3 is explained by economists mainly by the good performance of agriculture. They, however, warn it would be a mistake to count on the same pace for a future growth. ‘We should <normalise> the evolution of the GDP, taking into account the exceptional agricultural production we’ve had this year. It’s a fact that the construction sector has been resuscitated through public contracts. I believe Q4 will bring a slow-down compared to Q3,’ said economics professor Daniel Daianu, HotNews.ro reports.
Performance in Q3 exceeded all estimations, said the former Finance minister. ‘It is possible that we may finish this year roughly on a 2 per cent GDP growth, mainly thanks to agriculture. Things will get a bit more difficult in 2012 because of the international context, banks’ deleveraging and continuation of fiscal consolidation. If the absorption of European funds marks a dramatic rise and if there are no ‘explosions’ in the euro zone, we may see a slight increase also next year,’ Daianu also said.
We have to wait for all details in order to see what drove these numbers. Although it may look big, I wouldn’t use this number for any estimation in future projections. It is more an exceptional situation, similar to Q3 of 2008’, Romanian economist Florin Citu explained.
‘This is the first more robust sign of economic recovery in three years. On the other hand, the economic growth in the EU in June 2010 – June 2011 was by over 1.6 per cent, whilst in Romania it was only 0.3 per cent. Other countries that have implemented austerity measures, some of which were really tough, such as Latvia or Estonia, registered even more substantial economic growth at the end of June 2011 – 5.7 per cent and 8.4 per cent respectively. Romania has a superior growth potential compared to the EU-27 average, but this advantage has not been fully exploited in the last few years,’ Macroanalitica managing partner Laurian Lungu also said.
Raiffeisen Bank chief-economist Ionut Dumitru stated on The Money Channel that the Q3 economic growth was based on an exceptionally good agricultural production this year, as well as on the reinvigoration of all other sectors. ‘I don’t expect to see a growth of agriculture as big as in Q4 and I don’t think 2012 will be as good for agriculture as 2011 has been,’ Dumitru explained. According to him, because export will most likely slow down in 2012 and economic indicators are going down in the entire euro zone, we should expect a poor evolution of Romanian economy next year.
On the other hand, President Traian Basescu said on the public television, Monday night, that the economy had grown by 4.4 per cent in Q3 and he hoped for a 2.5 per cent growth in the last three months of the year, so that the GDP growth for the entire 2011, Realitatea.net informs.
Basescu was asked if a budget with such a slim deficit wouldn’t carry the risk of suffocating economic growth. ‘Yes, this theory also exists and it is correct,’ he answered, then explaining why the government had set such a small deficit target. ‘We must choose between the risks of an austerity which does not stimulate growth and a small deficit of 1.9 per cent or a 3 per cent deficit which is less risky in terms of operation as a brake for economic growth, but the price at which we must borrow to finance it is really high. Between these two risks, we chose the smallest risk – a deficit that does not necessarily foster economic growth, starting from the reality that we also have other resources,’ said the president.
PM Emil Boc also stated yesterday at Lancram, Alba County, Romania is operating with an economic growth of 1.5 – 2 per cent for 2011, which is the biggest growth in the last two years. He also said that fact proves the fact that the government’s policy to invest and create jobs was correct, Mediafax reports.
‘Obviously, a small deficit will be reflected by a smaller economic growth in 2012. In conclusion, the analysis of the dynamic of the latest economic growth data is not necessarily encouraging. The economic growth in Romania depends on foreign capital which, for now, is not very eager to come. We should be prepared to replace it by bigger EU funds, but the absorption rate is far too slow there. We should have used more funds from privatizations, but we are barely getting to work in that department, therefore any possible revenue coming from privatisation will not be available before 2013 in the best case,’ Lucian Croitoru, central bank Governor Mugur Isarescu’s adviser on matters of monetary policy, also said.
Romania, the biggest GDP advancement in EU
GDP increased by 0.2% in both the euro area and the EU27 during the third quarter of 2011, compared with the previous quarter, according to flash estimates published by Eurostat.
The biggest growth, in the third quarter, was registered in Romania, with 1.9 percent advancement, compared to the second quarter of 2011. Next come Latvia and Lithuania, with a growth of 1.3 per cent. Also, the only countries with a decreased GDP are Cyprus (-0.7per cent), Portugal (-0.4 per cent) and Netherlands (-0.3 per cent).