There are various forecasts about Romania's GDP in 2009. Most analysts from local and international rating agencies believe our country will face recession, while government members predict a 2.5 percent economic growth rate, laid down in this year's draft budget. Throughout the first nine months of 2008, an economic growth rate of over 8 percent was reported, which gradually took a downturn towards the end of the year. The rating agency Moody's says that the national economy will experience a slight contraction, of 0.5 percent. We should note that Moody's is the only major agency in the branch that has kept Romania in their “low risk investment” category.
Other such notable agencies, like “Standard and Poor's”, and Fitch, are wary of the Government's capabilities to handle budget deficits, the current account deficit in particular. As a result, those agencies have demoted our country below their so-called investment grade-line, ranking it with a high investment risk. Moody’s says that the measures taken by the new government to slash spending do away with certain deficiencies of the previous cabinet’s budget policy. Both Moody's and Fitch forsee a possible recession. Standard and Poor's, however, estimates that this year, Romania will have an 0.8 percent economic growth rate, a budget deficit of 6.2 percent of the GDP, a 5.3 percent inflation rate and a current account deficit of 10.6 percent of the GDP.
The International Monetary Fund estimates that in 2009, the Romanian economy will depreciate by about 1 percent compared to 2008. A communique of the IMF delegation that paid a visit to Romania early this month says that quote “Romania is currently highly affected by the global crisis. While economic growth was reported in the first three quarters of 2008, production pointers plummeted by the end of the year. Exports began to decrease in number and value, and banks instated much harsher conditions when it comes to granting personal or household loans. Consumption on the local market and investments are estimated to decrease. There is a drop in industrial output, and consumers and companies’ confidence has lowered. Consequently, economic activities will slacken and the GDP might drop in 2009.” End of quote. Representatives of the International Monetary Fund also predicted a moderate economic recovery no earlier than late 2009 or even in early 2010.
On the other hand, Romanian analysts are more pessimistic estimating a drop of up to 3.5 percent this year. Here is Patrick Gelin, president-general manager of one of the largest Romanian banks – BRD Groupe Societe Generale.
“In my opinion, at this point no one has a clear idea about Romania’s economic growth in 2009. You have seen the statistics and forecasts released by international institutions and analysts. They range from negative growth rates of minus 1- 2% to a positive growth rate of 3%. The difference is quite significant. Unfortunately, Romania’s economic evolution in 2009 is unpredictable. The country’s policy this year is to gain credibility before the international institutions. The country has the means to cope with the crisis, thanks to its domestic market and its relative independence from international markets, without falling into deep recession. What is missing today is for the international analysts and financial institutions to be convinced of the efficiency and credibility of the economic plan the Romanian authorities have to implement.”
On the other hand, the 2009 draft budget was built on a 2.5% economic growth rate, a GDP of 144.7 billion Euro, a 2% budget deficit and an inflation rate of 5%. Representatives of the National Bank of Romania have predicted a 2 to 2.3% economic growth rate in 2009. Chief Economist of the National Bank of Romania, Valentin Lazea, has said that quote “Romania has more prospects for economic growth than other economies in the region, as it is less dependent on energy imports and on exports and the share loans have of the GDP is quite small, only 40%. Not having a Monetary Board is another plus.’’ Unquote. According to the Governor of the Central Bank, Mugur Isarescu, the indirect effects of the world crisis have hit Romania’s economy, but its direct effects are quite limited:
“We can further state that the Romanian banking system is solid and not only is it unlikely to raise problems or problems similar to those in other economies,but it can also be an anchor of economic recovery. The direct effects of the international financial crisis on Romania are limited and I insist on the idea that even after assessing, for the third time, the level of the Romanian banking system, we have found no risk of exposure to the toxic assets that triggered the global crisis. We have found that the traditional banking products are prevalent, for clear reasons such as a huge profit margin, and, last but not least, cautionary and sometimes administrative measures, harshly criticized by the banking system, have proved useful and have served as a buffer against the crisis effects. Mandatory minimum reserves for instance, serve as buffer stock of liquidity, helping both the country and the banking system, to resist possible foreign shocks.”
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2010-02-09
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