Premier: The country is financially and economically sound
In a statement from Victoria Palace last night, Prime Minister Victor Ponta stressed that the situation in Romania is stable and that, together with the central bank and the Ministry of Finance, the Government had all the necessary tools for alleviating any kind of negative effects propagated from the European market. He also informed the approval of a memorandum with the World Bank for a new precautionary financial agreement worth EUR 1 bn to be used as a buffer fund in case of necessity.
Analysts say there is no reason to panic, as growth is expected to return in Q2. Gov’t maintains growth target at 1.5 pc in 2012, while economists say growth will be less than forecasted by IMF, bellow 1 pc.
The economy dropped 0.1 per cent in Q1 compared to the last quarter of 2011 and has entered a recession, the National Statistics Institute (INS) announced yesterday in a communiqué. This was the second consecutive quarter of economic slump, the development being anticipated by analysts who expected a slightly higher contraction of 0.2-0.3 per cent. These are the first estimates on economic developments in January-March, being called “signal data.” The INS will announce on June 6 the provisional data for the aforementioned period. Romania has thus entered a technical recession, a situation it found itself in for two and a half years, from 2008 to 2011. Last year the GDP grew by 2.5 per cent, being mainly backed by the agricultural sector (+11.3 per cent) and industrial sector (+5 per cent). Nevertheless, compared to the same quarter last year, the GDP grew by 0.3 per cent as a gross series and by 0.8 per cent as a series adjusted to the number of working days and seasonality. Analysts were expecting this development, their outlook pointing to a GDP drop of 0.2-0.3 per cent quarter-on-quarter, Mediafax informs.
Daianu: Q2 could return to upward trend but growth will be modest
The Romanian economy could return to growth in Q2 of 2012, however the growth will be small, mainly because of the tensions in the Euro Area, economist Daniel Daianu, state aide within the Prime Minister’s staff, stated yesterday, money.ro informs. The economist pointed out that technical recession is not a reason to panic, however Romania will be affected by the situation in the Euro Area, a situation that will lead to a drop in exports, an effect that can be lessened only to a small extent by the growth of internal demand staked on in 2012. In the current context, the National Bank of Romania (BNR) represents the main internal mechanism for counteracting the effect of contagion the Romanian economy faces, the state aide pointed out. Likewise, the economist pointed to the absorption of European funds and the fight against tax evasion as internal measures for supporting liquidity. In his turn, economic analyst Ionel Blanculescu claims that Romania is in an economic slump, not in recession, b1.ro informs. “This is an erroneous analysis some are making. I inform you that a recession exists only from an economic point of view, there is no statistical recession, there is no academic or technical recession. The economic recession is not declare at the level of two quarters of economic drop,” Blanculescu stated. The analyst claims that the announcement affects on one hand the country and on the other international markets, as well as investor confidence in Romania. In his turn, BNR Governor’s aide Adrian Vasilescu told Realitatea TV that the recession is strictly statistical, based on the figures offered, and is not really reflected in the economy. The aide added that the current recession is the result of the fact that people in Romania are not working hard.
Ponta: Only private sector to post growth
For the time being Romania is not registering smaller budget revenues but will be able to post growth only in the public sector, Premier Victor Ponta stated yesterday, pointing out at the same time that “the government does not give up its plan to hike public sector salaries this year,” Mediafax informs. “We will have a programme of cutting back the number of useless taxes that lead to bureaucracy and corruption and we have to prepare as much as possible to preempt the negative effects that stem from developments at European level, particularly in what concerns Greece,” Ponta said. At the same time the Premier pointed out that the economic data for Q1 was known to the authorities for a long time and that the target of an economic growth of 1.5 per cent this year will be maintained. “It’s important to be able to see how much we can stick to that target,” Ponta concluded.
Analysts estimate growth below 1 pc this year, below IMF target
Raiffeisen Bank and ING Bank analysts opined that the economy will enter technical recession, their estimates pointing to a 0.3 per cent drop in GDP compared to Q4 of 2011. “Our economic estimates in Q1 put the economic growth at 1.3 per cent in annual terms. The available macroeconomic data shows a negative dynamic in exports in Q1 of this year, as well as a slowdown in industrial production. The weak performance of the main economic engines can also be interpreted in seasonal context, taking into account the harsh winter,” Georgiana Constantinescu, Credit Europe Bank analyst, stated. “Exports have already been affected by the developments in the Euro Area, and in the local context of deleveraging crediting is not making any headway, particularly because of European pressures on bank capitalization. It’s true that the demand does not favor crediting either. The only option through which we hoped for a more sustainable growth was the absorption of EU funds, which turned out to be a fad that everyone wants but that doesn’t really happen. The progress is smaller than expected,” Raiffeisen Bank Chief Economist Ionut Dumitru stated. He believes that Romania has a relatively stabilized economy in which macro balances are under control, even though the current account deficit is above the regional level, but an economy that lacks resources for growth. “The economy doesn’t have fuel for growth. And this fuel is difficult to find if capital flows are not what they once were. I don’t even think they will be much higher anytime soon. We have to find the resources where they are, namely in EU funds primarily. Without European money we have to expect an economic growth below 2 per cent from now on,” Dumitru added. At the same time, Raiffeisen estimates an economic growth of 0.5 per cent for this year, just a third of what the IMF estimates. UniCredit Tiriac Chief Economist pointed out that the current forecast for 2012 stands at +1.2 per cent, but will drop below 1 per cent if UniCredit Group lowers its economic growth forecast for the Euro Area. RBS Romania analysts’ estimate concerning this year’s GDP is one third of the official outlook too. “For the whole year we have an economic growth estimate of approximately 0.5 per cent, the quarterly distribution reflecting a drop even in annual terms in Q3, when the negative base effect from agriculture will reach its highest point,” Catalina Molnar stated. BCR analysts believe that the outlook for the following quarters is better than that for the first quarter and expect an economic growth of 1.2 per cent considering that Romania is one of the few European countries that has at its disposal fiscal room for giving the economy a stimulus. ING Bank’s economic growth estimate stands below 1 per cent too, having a level of 0.8 per cent at the end of the year. Credit Europe’s estimate is the only “optimistic” one, anticipating a real GDP growth of 2.1 per cent.
Erste: Euro crisis affecting exports and investments in Romania
The recession will probably continue in the Euro Area in Q2 too, thus affecting Romanian exports, while tensions and uncertainties in Europe risk “enervating” investors, thus having a negative impact on FDI in Romania, the analysts of Erste, BCR’s parent-bank, anticipate. The Austrian bank estimates an economic growth of 1.2 per cent this year in Romania.