EDITORIAL

Keysfin analysis: Romanian paradox. Economy is growing, poverty is increasing!

In the next two years, Romanian economy is likely to achieve an excellent level of economic growth, estimated by experts at 4.4 to 4.8 percent in 2016, and at 5.2 to 5.7 percent in 2017, amid the stimulation of the domestic demand, as a result of the fiscal relaxation measures. But the paradox is that, as the gross domestic product is gaining momentum, stimulated mainly by trade, the poverty rate is more and more higher, according to the KeysFin data.

We’re officially well, if we analyze the data provided by the National Institute of Statistics. The GDP has grown by 5.2 percent in unadjusted series, in the first half of 2016, and by 5 percent in the seasonally adjusted series in the first half of 2016 compared to the same period of the last year, while in Q2, the GDP growth was 1.5 percent compared to Q1 and 6 percent compared to Q2 2015.

In the spring economic forecasts published early in May by the European Commission, the EU Executive estimated that the Romanian economy will register a 4.2 percent growth in 2016, while most of the banks and financial institutions present in our country estimated a 4.4 to 4.8 percent growth.

“The data looks encouraging, but if we look at what is hidden behind this growth, we see that the economic development is primarily due to consumption, which is salutary for the moment, but in the medium and long term it can be a real poisoned apple”, said the KeysFin analysts.

“Healthy economic growth is the production based growth, it is the growth based on added value, on involving horizontal economic chains. Without industry, without production, without finished products, the economy will become more and more sensitive to external developments. If a new crisis breaks out, the impact will be devastating, because consumption will be the first affected”, they warned.

Statistics also indicate another worrying thing, which KeysFin analysts have pointed since the previous years – Romania is turning in an economic enclave, and thus, poverty becomes more and more present in the rural areas.

“We warned in the past that Romania has three speeds of development, one speed specific to the dynamic regions, like Bucharest-Ilfov, Timis-Arad and Constanta, another speed, a little bit slower, specific to the businesses developed in regions like Brasov, Cluj, Arges and Galati, and a third one, extremely slow, actually a real break specific to mono-industrial regions, like the ones in Moldova, Oltenia, Baragan. These regions have become real enclaves of poverty, where business is stagnating and the workforce doesn’t have any chance than the migration to regions with potential”, analysts showed.

The even worse news is that, despite the significant economic growth in 2016, the poverty rate tends to reach a record of the recent years, after it rose, in 2015, above the 25 percent (25.4 percent) level, exceeding the previous record of 24.8 percent, recorded in 2007.

“There are regions in Romania, like the North-East one, where poverty rate has reached the 35.6 percent level. South-East Region also has the same coordinates, with a poverty rate of 33.3 percent, followed by South-West Oltenia with 29.7 percent, West Region with 26.7 percent, and South-Muntenia with 25.5 percent. The average 25 percent is provided by the impact of the situation in Bucharest-Ilfov, where the poverty rate is the lowest, namely only 5.5 percent”, KeysFin analysts explained.

According to INS (National Institute of Statistics), more than 8.5 million people are at risk of poverty or social exclusion, which number places our country on the first place in EU regarding the relative poverty rate.

“The percentage of the relative poverty (the percentage ratio between the number of poor people having an available income per equivalent adult lower than the threshold set at the level of 60 percent of the median of the available incomes per equivalent adult and the total population) has increased by 3 percent in 2015, and we are likely to follow the same trend in 2016”, stated the analysts.

Besides, according to the data provided by Eurostat, around 40.2 percent of the Romanian population was exposed to the poverty and social exclusion risk in 2014, which situation placed it on the first place in EU, given that, at the EU level, 122 million people, meaning 24.4 percent of the population, were in this situation.

World Vision statistics recently indicated that almost one third of the children’s families in the rural areas don’t have enough incomes for the day-to-day living. The percentage of those who always go to sleep hungry doubled to 4 percent, compared to 2013.

 

How can we overcome this situation?

 

According to the KeysFin analysts, the current situation is likely to create a social risk, especially in the circumstances in which the perspectives of a new wave of crisis are more and more solid.

The major role in decreasing the impact of this economic polarized evolution is given by the manner in which the legislative initiatives will be effectively implemented, so that they will create investments with a horizontal development that will be able to provide jobs especially in the disadvantaged areas. The first step must be in infrastructure.

“Our statistics indicate that investments in infrastructure are concentrated in Transylvania, Muntenia and only in a small extent in Moldova, Oltenia and Dobrogea. Without an optimal infrastructure, attracting investors is almost impossible”, said the KeysFin experts.

Analyzing the governmental data, the specialists noted that regional investment strategies have not yet turned into actions. In these circumstances, the depopulation phenomenon of some rural areas has accelerated, and the urban agglomeration tends to become stifling, especially in the Bucharest-Ilfov region.

“We need to see Romania as a business, to look for its advantages, opportunities, to extract its resources and optimize the relation between the regions of the country. Without an overview of the economy, without fiscal measures to stimulate the development of the disadvantaged areas, especially of the infrastructure, we build highways for nothing in prosper regions, while more than a half of the people don’t have water supply, relying on the well in their courtyard”, stated the KeysFin experts.

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The information in the above material is collected from the barometer on the Romanian business status, a project developed by KeysFin by analyzing the financial data regarding trade operating companies and authorized persons in Romania.

KeysFin provides business information and credit management services for the business environment, from credit reports, monitoring, analyzing competition, to surveys and sector analyzes needed by the companies who wish to develop a healthy business on the Romanian market. More details are available at www.keysfin.com.

KeysFin also holds the KeysFin Mobile app, through which the user can easily and quickly access contact information, financial statements, indicators and legal information of more than one million operating companies and authorized persons in Romania.

 

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