Romania: Future Economic Growth Questioned
By SETimes
By Paul Ciocoiu
President Traian Basescu recently voiced optimism concerning Romania’s future economic performance.
“It is excluded for Romania to skid economically as long as we are part of the Troika programme (IMF, European Commission and World Bank). We have all the seatbelts fastened. We can afford optimism,” he said after meeting the Troika delegation to Romania this month.
Agriculture propelled the 4.4% economic growth in the third quarter, but analysts forecast a slowdown ahead.
Compared to the second quarter, Romania had the largest economic growth among the 27 EU member states. A 1.5% overall growth is expected for the whole year, while for 2012 the latest World Bank forecast shows growth of 1.8 to 2.1%.
Analysts, however, caution over economic growth at the end of 2011 third quarter.
“It is not a sustainable growth, but a conjectural one, based on good results in agriculture. But I rule out a similar growth rhythm in the next period,” Dan Popa, who runs a popular blog on economics, told SETimes.
“All we can hope now is that the economic slow down in the rest of Europe the least impacts our growth. The ricochet risk still exists and is felt as we speak due to increased losses incurred by the local banking system, after the situation in Greece and Italy,” he added.
Another risk comes from possible political populism in next year’s elections, Popa said. “This risk is highlighted in almost all internal bank reports, the IMF and in officials’ speeches. Unfortunately, the political noise covers the economic moan,” Popa warned.
The positive economic trend, however, is far from impacting Romanians’ living standards that saw a steep decline amid the recently concluded recession.
“Good news regarding growth in the third quarter is rather a statistical reference than a starting point in re-launching the local economy with visible effects on the ground,” Victor Lupu, deputy chief-editor of the Nine O’Clock newspaper, told SETimes.
“This is why I would question any expectations of a rise in the living standard in the near future. No raises and no good news lie ahead. In order to ‘feel’ the economic benefits, we should expect an economic growth of at least 3% to 4% of GDP,” Lupu added.
Public employees are the most anxious for better economic changes after their salaries were slashed by 25% as part of the austerity measures in 2010.
“We can talk about a rise in the standard of living only after 25% are put back in our salaries. This is the point where we start counting from. Until then, all this good news remains just figures on paper for us,” Vasile Dumitrascu, a state agency accountant, told SETimes.
Romanian officials refuse to say whether salaries and pensions will increase next year. The Troika representatives, who caution when it comes to public spending, say such a measure is possible as of mid-next year, depending on the country’s internal economic situation and external factors.
