Isarescu: 1-2 pc economic growth in 2009, below BNR’s forecast
Nine O’Clock March 9, 2009
by Anca Bernovici
EC warns Romanian economy will dramatically stagnate
Romania will post an economic growth of 1-2 per cent in 2009, which is “a performance” considering the current crisis, as BNR Governor, Mugur Isarescu, said on Friday, in Brasov, his estimation being below the latest forecast issued by the central bank.
Isarescu said, within the context of the conference organized by the Romanian Banking Institute, cited by Mediafax, that he was thinking of himself as being “an incurable optimist” and he believes that Romania will pose 1-2 per cent economic growth in 2009, which he regards as “a performance”, considering the current crisis. This can only be achieved following a tight cooperation among BNR, government, banks and business environment.
“A possible success in this case, considering that the world economy slows down suddenly, considering that EUR zone is likely to pose a strong negative growth and considering that the European Union will have a negative growth, Romania expects a small growth, 1-2 per cent”, BNR Governor said.
In early February, BNR vice governor, Cristian Popa, said that BNR was expecting an economic growth of 1-2.3 per cent for this year, below 2.5 per cent set in the budget law for 2009. Popa said that BNR was not excluding the alternative of an economic recession this year, which is “unlikely”.
Recently, the European Commission (EC) revised downwardly the estimation related to Romania’s economic growth from 1.75 per cent, released in January, to 0-0.5 per cent. Finance Minister, Gheorghe Pogea, said for Antena 3 TV, that Romania would end the year having an economic growth “over zero”, but he avoided making any reference to the evolution in 2010, indicating that there were many uncertainties. The slow down in the economic growth, over the last quarter of the previous year, to 2.9 per cent, the lowest level of the respective time period in the past nine years, limited GDP to 7.1 per cent in 2008, which still was by 1.1 per cent over 2007, based on INS preliminary data.
Crediting to be resumed in spring
Mugur Isarescu, considers that the banks will restart lending this spring, specifying that the economic crisis may also have positive effects on Romania. He said that provided that the strong growth rate of lending continued, “we would have deepened into debts” in maximum two years.
Paradoxically, this economic crisis may have positive effects for Romania. If the crisis did not come and we continued to benefit from lending as it happened in the past years, it could have been that we would have deepened into debts in two years”, Isarescu said. On the other side, he mentioned that Romania “was still under the spectrum of a much too brutal cessation in lending”, which is expected to resume in spring.
BNR Governor said that the construction sector would not fall, the private investments started are ongoing and new yards are to be opened.
0.5 pc inflation rate in February
The monthly inflation rate dropped from 1.24 per cent in January to 0.5 per cent in February, whereas the annual rate reduced from 6.71 per cent to 6.5 per cent, induced by the stabilization in the exchange rate and by the slowdown in the domestic demand, according to most of the analysts interviewed by Mediafax. The analysts estimate that the consumer prices advanced in February by 0.3 – 0.7 per cent compared to the previous month and by 6.34 – 6.7 per cent in annual terms.
ING Bank Romania economist, Nicolaie Chidesciuc, thinks that the inflation rate was 0.5 per cent in February and it was 6.5 per cent in annual terms. Chidesciuc forecasts that the disinflation process continues until June, but there is a risk for this to interrupt in the second half of the year, with the inflation accelerating up to 8 per cent at the end of the year. BRD – Societe Generale chief economist, Florian Libocor, anticipates a growth in consumer prices, in February, closer to the average indicated by the estimations of analysts, namely 0.3 per cent compared to January and 6.6 per cent in annual terms. The most pessimistic was the chief economist of Raiffeisen Bank Romania, Ionut Dumitru, who believes that inflation dropped in February to 0.7 per cent in monthly terms and the annual rate to 6.7 – 6.8 per cent.
Vienna experts: zero economic growth for Romania this year
Romania’s economic growth is zero this year, according to a report released by Vienna based Institute for Compared economic Surveys, cited by Realitatea TV. The news is good considering that the West European countries experience recession. The report indicates that economic stagnation will also be experienced by Bulgaria and by Slovenia. The experts of the institute from Vienna estimate that Slovakia will pose 2 per cent economic growth, Poland, 1.5 per cent. The institute warns that the establishment of a lasting recession in the East European countries cannot be avoided without international assistance.
EC warns Romanian economy will dramatically stagnate
Nine O’Clock – January 20, 2009
Economic growth will be of only 1.75 pc in 2009 and 2.5 pc in 2010 compared to 7.8 pc in 2008. Budget deficit may reach 7.5 pc of the GDP.
published in issue 4351 page 1 at 2009-01-20
The economic and financial crisis that has already caused recession in some of the member states will badly affect Romania this year and will further misbalance fiscal equilibrium, a severe slow-down of the economic growth to 1.75 per cent being expected, reads the 2009-2-10 economic forecast the European Commission published in Brussels on Monday.
The document also estimates ‘record’ values for the budget deficit – 7.5 per cent of the gross domestic product in 2009 and 2010, the year when the EU Executive expects a slight recovery of the EU economy. Brussels believes that, under all those conditions, Romania will have major difficulties in reaching the desired budget revenue rate.
Last year, the public deficit was 5.2 per cent of the GDP, meaning the European standard (ESA95).
Under the conditions, says the European Executive, the Romanian Government will have to resort to massive borrowing, which will increase public debt to up to 21.1 per cent of the GDP in 2009 and 26.8 per cent in 2010, compared to 15.2 per cent of the GDP in 2008 and 127 per cent of the GDP in 2007. Another sector that will be affected, according to the Commission, is foreign trade, where there is a risk for export to only grow by 1.3 per cent in 2009 and for import by 1.7 per cent, whilst domestic demand will only increase by 2.2 per cent in 2009 compared to 11.4 per cent in 2008 or 15.7 per cent in 2007.
There is also good news coming from Brussels – the current account deficit will drop from 12.9 per cent of the GDP in 2008 to 11.9 per cent in 2009 and to 11.1 per cent in 2010.
Moreover, says the EC, inflation is expected to stay at around 5.7 per cent in 2009 and 4 per cent in 2010, less than 7.9 per cent last year, all data being calculated based on the harmonized consumer price index, the EC prognosis further shows.
On the other hand, unemployment will grow to a rate of 7 per cent in 2009 compared to 6.2 per cent in 2008, all calculations being performed in keeping with the International Labour Bureau standards.
According to the Commission’s estimates, international economic activity considerably dropped in the last quarter of 2008, smaller numbers of orders having been registered. European experts also think economic recession will spread and will have bad consequences upon emerging economies. The world GDP growth will slow down in 2009 to 0.5 per cent compared to 3.3 per cent in 2008 and to the outstanding 5 per cent average recorded in 2004-2007. Starting from the latter half of 2009, world economic growth should become increasingly visible but at a moderate pace, with the improvement of the situation on the financial markets and with the effects of the more flexible macroeconomic policies becoming visible (especially in the USA).
Surging unemployment and deficits
The Commission says the employment situation in the EU is worse than it was in 2008, with an expected negative growth of employment this year and with a loss of 3.5 M jobs.
This will lead to a growing unemployment rate of up o 8 per cent in the EU (and 9 per cent in the Euro zone) in 2009. The degradation of economic prospects should have negative effects upon public finance which will also have to suffer from the reversed trend of additional revenue compared to the previous years, of a structure that will be generally based less on taxes and of the effects of important discretionary measures adopted or announced by the member sates (representing approximately 1 per cent of the GDP of the EU in 2009 when the forecast was completed). The global deficit will therefore register a double-fold growth in the EU this year to 4.5 per cent in 2009 (the ratio being nearly 1.75 to 4 per cent in the Euro zone).
UNCTAD more optimistic than the EC
Romania will register 4.3 per cent economic growth in 2009, after a pace of growth of 8 per cent reported in 2008, according to the estimates of the UN Conference for Trade and Development (UNCTAD) published at the week-end, which are more optimistic than those of the European Commission. UNCTAD also forecasts that inflation will reach 5 per cent this year after 8 per cent in 2008. The unemployment rate in this country which UNCTAD forecasts at 6.8 per cent in 2009 will stay close to the level of 7 per cent set for the previous year.
CNP estimates 7.9 pc GDP growth for 2008
The National Prognosis Committee (CNP) estimated, in their last analysis published on Monday, that the GDP registered a rise of 7.9 per cent last year, totalizing RON 513,175 billion (EUR 139,35 billion), an advance slightly higher than the one of 7.8 per cent calculated by the Government and by the European Commission, according to Realitatea TV. For 2009, CNP expects an economical increase of 2.5 per cent, and these values were already taken into account by the Government for budgetary projections.