Absorption of European funds is vital for economic growth this year, BNR Governor Mugur Isarescu explained.
Last year the GDP grew by 2.5 per cent. In Q4 of 2011 the GDP grew by 1.9 per cent compared to the same period the year before, but economic activity dropped by 0.2 per cent compared to the previous quarter. Thus, the National Statistics Institute’s (INS) data coincides with the figure that President Traian Basescu mentioned one month ago.
According to preliminary estimates, in Q4 of 2011 the GDP dropped by 0.2 per cent compared to the previous quarter (seasonally adjusted data).
Compared to the same quarter the year before, the GDP grew by 1.9 per cent as gross series and by 2.1 per cent as seasonally adjusted series. The preliminary data on the GDP registered in Q4 will be published by the INS on March 6.
The IMF and the European Commission estimate an economic growth of 1.5 – 2 per cent this year, while this year’s budget is based on an economic growth of 1.8 – 2.3 per cent.
National Bank of Romania (BNR) Governor Mugur Isarescu explained that the absorption of European funds continues to be crucial for economic growth in 2012, considering that one cannot stake too much on the growth of internal consumption and the European crisis could slow down Romanian exports, hotnews.ro informs. Moreover, after a bumper crop in 2011, the agriculture sector’s GDP contribution in 2012 will probably be lower. The Governor pointed out that the FDI’s and medium and long-term external loans’ drop from EUR 16 bln in 2008 to EUR 2 bln in 2011 is powerfully felt in the economy. Likewise, the head of the Central Bank agrees that lowering the monetary policy rate stimulates economic growth and crediting but these potential hikes will be smaller compared to what happened in the past.
In his turn, BCR economist Eugen Sinca considers that the economic slowdown in the Euro Area was the main factor behind the GDP’s disappointing evolution, the Euro Area being the destination of 55 per cent of Romanian exports and the source of 80 per cent of FDI. The recovery of the constructions sector and of commerce was not strong enough to counterbalance the drop seen in external demand. “After today’s data was published we see the risk that our economic growth estimates for 2012 (1.2 per cent) will come true. A better absorption of EU structural funds is extremely important for maintaining economic growth,” a note signed by Sinca reads.
Possible GDP contraction in Q1 of 2012
The industrial sector’s growth rhythm has significantly slowed down, even though the commerce sector has compensated that drop a bit, Volksbank chief economist Melania Hancila stated for hotnews.ro. “Overall, exports and the agriculture and industrial sectors were the high-performers in 2011, while consumption remained low. In 2012 we expect a GDP contraction in Q1, both year-on-year and quarter-on-quarter; we don’t see where the growth could come from. It will be the first cold shower for the authorities,” Melania Hancila added.
RON does not react to INS data
BNR posted yesterday an exchange rate of RON 4.3467/EUR and RON 3.3/USD, levels close to those posted on Tuesday. When it comes to the Swiss Franc, the exchange rate stood at RON 3.6/CHF (compared to Tuesday’s RON 3.59/CHF). On Wednesday the EUR/USD exchange rate stood at 1.3151. “The market was static and frozen, in line with the weather. There were low-volume transactions, a shallow market that saw no ripples. The INS announcement on the GDP’s evolution had no effect,” a commercial bank’s dealer summed up the situation. BNR will very likely defend the RON’s reduced volatility in order to preempt exchange rate shocks that would affect the macroeconomic equilibrium.
