This year, expert forecast indicates an economic growth for Romania worth around 1.5% - 2.5%, after the 3.6% growth in 2013.
Standard & Poors has recently noted that Romania entered technical recession in the first half of 2014, as it had two consecutive quarters of economic shrinkage, caused mostly by low investments, which in turn were caused mostly by a low rate of absorption of European funds. For this reason, the agency has anticipated that Romania’s economic growth this year will slow down, reaching 2.2%.
However, S&P anticipates that between 2015 and 2017, Romania will have an average growth of 2.7%, with a gradual improvement in domestic demand, in spite of the population decline and factors inhibiting growth, such as a poor infrastructure. Moreover, the agency believes that Romania will reach its target deficit of 2.2% of the GDP, while public debt will continue to stay below 40% of the GDP over the next three years. Fitch also forecasts a 2.2% growth for this year, but it expects it to go up to 3% annually in 2015-2016. At the same time, the IMF downgraded its estimates of economic growth for Romania at 2.4% this year, as opposed to a 2.8% growth anticipated in June. For 2015, the IMF forecast stays the same, 2.5%.
Recently, the National Statistics Institute has made public the short-term forecast of company managers. They claim that there is a trend for moderate growth in the processing industry and services, a relative stability in retail and a moderate drop in constructions. At the same time, the number of employees will also drop moderately in constructions, will rise moderately in retail, and will stay relatively the same in the processing industry and services. Economic analyst Aurelian Dochia claims that company managers have changed their perception of this year’s situation after a number of EU countries had less than convincing performance as opposed to expectations early this year.
Aurelian Dochia: “Romania also has a relative correlation between what occurs in Europe and national indicators, because obviously a lot of Romanian companies that export their products are influenced by what happens in Europe. For this reason I believe that these indices in general tend to stagnate, and the entities working in retail, in consumption, have downgraded compared to the optimistic expectations prevailing a few months ago. Things are more temperate right now. If we go by these indices, by the end of the year we will not see economic growth. After the first two quarters showed shrinking, the so-called technical recession, we will see a third quarter which will probably show stagnation, or at least it won’t show much growth, so that all in all, in 2014 we will have growth worth around 2%, even below that.”
This year Romanian exports are estimated to amount to over 50 billion Euro. Economy Minister Constantin Nita said that Romania should diversify its export markets, expecting the country to become an important energy exporter in the region. Romania needs a growth rate of 5% if it expects to be among advanced economies. However, right now the economic growth is stable around 2 to 3%.
Here is Constantin Nita: “For the time being, I don’t think we are able to grow more than 2 to 3%. The economic context is not favorable. Of course, this varies. It is possible for next year to be better. At the same time, you cannot perform well on the foreign market when in certain places they work with equipment 40 to 50 years old.”
The Romanian Academic Society, which consulted several economic analysts, believes that 2014 will end with a modest economic performance, little over 2%.
Here is Razvan Orasanu, representing that NGO: “This 2.09% modest economic growth we forecast will not mean a significant drop in unemployment, will not mean rising real estate investment, will not mean growth on the stock market. Even though there are fears that the election year will result in macroeconomic shrinkage, analysts do not anticipate budget deficits out of control. For the most part, everyone forecasts the economy to fall between the limits drawn for by the IMF accord, with a single exception; everyone we consulted has deplored the way we are unable to collect budget revenue. While the average VAT collection rate in the EU is 80%, Romania has a rate of 58%.”
Most analysts consulted about economic growth were pessimistic regarding the economic figures given that 2014 is an election year, and also compared to the great results of 2013.