Romanian Economic Growth 2008

Varujan Vosganian: Record economic growth in Q2
Nine O’Clock – August 22, 2008
by Adriana Popescu

The GDP has registered a 8.6 per cent growth in H1 of this year, on the backdrop of an economic growth of 8.9 per cent in Q2, both figures setting new records for the economic indicators of the last two decades, Varujan Vosganian, the Minister of Economy and Finances, has stated on Thursday, quoted by Mediafax. In comparison, the economic growth stood at 6.1 per cent in Q1 of 2007 and at 5.7 per cent in Q2 of that same year. ‘This is the first time in the last 20 years when the economic growth reaches this level, and we cannot compare this with the communist era because others indicators were used back then’ the Minister of Finances stated. He added that Romania’s macroeconomic goal is to rank 7th in the EU economy-wise, down from its current 17th place. Thus, by 2012 Romania’s GDP could reach a level of EUR 220 bln, and one of EUR 440-450 bln in 2020, the projections being based on the historical growth rhythm and investment dynamics.

On the other hand, Daniel Daianu, former Minister of Finances and current MEP, considers that the Romanian economy lacks the potential to grow by 8 per cent year after year, and it will slow down so that we will be in for a difficult period in the next years. ‘I believe that more than 8 per cent is beyond our economy’s potential and it will show. Many Romanians live better than would be justified by their incomes. The Romanian economy currently lacks the potential to grow by 8 per cent year after year’ Daniel Daianu stated for the Money Channel.

According to the finance minister, the 2008 inflation target being missed will cost Romania a supplementary budget deficit of RON 2 bln, O.4 per cent GDP.

The minister also said a new budget rectification will take place in late September or October, depending on the evolution of budget revenues and spending.

The Minister of Finances has also announced that the general consolidated budget has registered a deficit of 0.64 of GDP after the first seven months of the year. ‘The deficit is on a downward trend compared to the six-month result back when it stood at 1.12 per cent of GDP’ Vosganian stated. According to him, 54.8 per cent of the revenues and 53.2 per cent of the expenditures have been completed.

FDI could reach record-breaking values by year’s end

In what concerns the foreign direct investments, the official stated yesterday that he hopes that Romania would register an inflow of more than EUR 10 bln by the end of this year. He reminded that Romania has registered an investment hike of 35 per cent in H1 of this year, compared to the level registered in the same period last year, representing a record-breaking hike within the EU. According to the Romanian Agency for Foreign Investments, the volume of foreign direct capital drawn by the economy in the January-June period stood at more than EUR 4.75 bln, compared to the EUR 3.5 bln registered in the first half of last year. Romania thus maintains and consolidates its top position in South-East Europe when it comes to drawing foreign direct investments, with an inflow of more than EUR 8 bln being forecast for 2008. In H1 of this year Romania has managed to draw 62.6 per cent of the region’s estimated total annual foreign direct investments.

Second place in EU subject to average income evolution

Romania is among the countries with the best evolution of the salaries at the level of the European Union. According to a report of the European Industrial Relations Observatory, quoted by Money Channel, last year our country ranked second in the European Union subject to the rate of growth of the average revenues and third subject to the increase of the minimum salary. As for the evolution of the revenues mentioned in the collective labour contract, Romania was outdistanced only by Lithuania, Latvia and Estonia. The average revenues of the Romanians increased last year by 7.1 per cent against 2006, to the level of 25.5 per cent. This development assured to our country the second position in the European Union. The average advance of the revenues varied in 2007 from 32.3 per cent in Latvia to 0.7 per cent in Malta.