International and domestic expert predictions for Romania’s economic evolution this year place growth at between 2 and over 3%
International and domestic expert predictions for Romania’s economic evolution this year place growth at between 2 and over 3%, considering that last year growth stood at 2.8%. The Romanian government, for instance, in charge of the budget, believes a 2.5% growth is a prudent target, but will attempt to force growth to over 3%, but that depends on international evolutions, as Cristian Socol, adviser to the prime minister, told Agerpres.
British consultancy firm Capital Economics estimates that Romania’s economy will grow by 3% this year, and 3.3% next year, thanks to a rise in domestic demand. Romania has a potential for growth, on the long term, of 4% a year, similar to Bulgaria, Poland and Turkey, according to Capital Economics. They estimate the inflation rate will be 0.8% this year and 1.8% next year. In 2014, the annual rate of inflation reached a record minimum of 0.83%. Also, analysts believe that financial markets in Romania are less vulnerable to the Greek debacle than they were between 2011 and 2012, considering that the current account deficit and short term foreign debt went down significantly in the last few years. The European Commission, on the other hand, anticipates that the Romanian economy will grow by 2.5% this year and by 3.3% in 2015, while the World Bank estimates that Romania’s GDP will go up by 2.9% this year and by 3.2% next year. Here is economic analyst Aurelian Dochia:
“It’s true, economic forecast for Romania is greatly improved. Basically, Romania is among the countries in the Union with the highest growth rates, but not the highest. Poland, for instance, is seen as growing faster than Romania, but it is important to bear in mind that Romania is seen as a country that in the next few years will perform better than the European average, which obviously contributes to reaching our target to getting closer to the EU average in terms of the GDP per capita. However, this growth is based on some assumptions that have to become real. To a great extent, this growth is seen as tied to domestic consumption, and exports will contribute less than before to this growth. An important factor to sustain this growth is investment, and part of this investment depends on attracting European funds. These are the sensitive points that Romania should work on in order to reach a pace of growth of 3% or over, in the upcoming years. If we look behind, we don’t have much reason for encouragement, because in the past few years we didn’t register much success in terms of attracting European funds. Investment, especially public investment, was pretty bad in 2014 and we can only hope it will improve in 2015-2016.”
In turn, the Financial Oversight Authority, which monitors the markets for insurance, capital and private pension funds, estimates a growth of 2% this year, even though the weight of agriculture and exports in the GDP will go down. The head of the Integrated Oversight Department with the FOA, Valentin Ionescu, told us:
“As far as we are concerned, there are not major adjustments. In terms of economic growth, we expect a maximum of around 2%. However, the components of the growth will change, we expect the exports and agriculture to contribute less to the GDP, we expect growth to increase, in order to sustain this estimated increase of 2%, which is the figure we estimate.”
Economic analyst Ionut Dumitru, head of the Fiscal Council, also commented:
“We have been on a trend of modest economic recovery for the last 2 or 3 years, after the adjustments made during the crisis. We have an economic growth of about 2%, if we rule out the agriculture side, which creates a lot of volatility in terms of figures. Before the crisis we had as much as 6%, which is not possible in the present context, but 2% cannot be satisfactory either, because the convergence with the level of development in the other European states is extremely slow, and even inexistent up to a point. If we look at 2014, we’ll see that domestic demand and consumption went up, but at a modest pace. Salaries have started going up, rather shyly, the number of employees started going up, and it is possible that the appetence for consumption was stimulated by increased revenue, but also by the very low level, which for many is quite unattractive, of interest rates for savings. So we had a new impetus in consumption, which may continue. It is expected for inflation to stay at very low levels, around 1%. In this context, we probably will have a rise in consumption, but not very high.”
A study by Ernst&Young Romania, cited by Mediafax, shows that Romanian companies are more optimistic about better turnover, investments, salaries and the number of employees in 2015, compared to foreign companies operating in the country. 55% of companies with domestic capital expect a significant growth in turnover in 2015, with figures of 10 to 31%, as opposed to only 39% of foreign companies that expect such growth. However, almost half of the foreign companies plan moderate growth of between 1 and 10%, as opposed to only 37% of Romanian companies. No Romanian company included in this polling expected a drop in turnover greater than minus 5%, compared to 6% of foreign companies, which expect a drop of between minus 5 and minus 20%.