World Economic outlook- Romanian Economic Growth Forecast 2012 ; For 2012, analysts’ forecasts point to economic growth in Romania by 0.5% up to 2%. The estimate of the IMF, the European Commission and of the Romanian Government, as laid down in the state budget law for 2012, stands at almost 2%. The same budget law stipulates a cash budget deficit of 1.9% of the GDP and the National Bank of Romania forecasts a 3% inflation rate. The Romanian Commercial Bank estimates a 1.2% economic growth for 2012 against the backdrop of high domestic demand; the in-flow of European funds worth 6 billion Euros, which the government counts on, would be a positive thing, says the chief economist of the Romanian Commercial Bank, Lucian Anghel:
“External demand might keep dropping. That will further influence the growth rate of exports and of the industry. We can see positive signals in the field of constructions and we also have great hopes for infrastructure projects, which might have a positive impact on the 2012- 2013 period. Consumption, unfortunately, is unlikely to grow and, according to estimates, consumption will be below its potential in 2012. What’s important is to maintain a sound economic growth and I believe that European funds are instrumental to attenuating the negative impact which might come from outside”.
But according to Economist Intelligence Unit, Romania’s economic growth in 2012 will only be 0.5% and that is due to the tough austerity measures taken by the authorities and to the European debt crisis. In turn, the head of the IMF mission to Romania, Jeffery Franks said:
“For 2012 prospects look worse. We now forecast a growth ranging from 1.8% to 2.3%, which is conditioned on a better absorption of European funds and on a higher internal demand. Inflation has dropped significantly thanks to bumper crops that have been obtained, and in the coming months, we expect it to further drop. It’s quite likely for the main inflation rate to keep within the limits targeted by the National Bank of Romania”.
The chief economist of the National Bank of Romania, Valentin Lazea, says that:
“Economic growth in 2012 will not be spectacular but it’s going to be sustainable. The industry might grow, even if not as fast as in 2011; the good news might come from trade and constructions. Private companies stipulate in their budgets real salary increases. In the public sector modest salary rises are possible, provided that the number of state employees continues to drop.”
Before the crisis, Romania’s economic growth mainly relied on foreign capital in-flows. At the same time, changing the economic growth model lasts years on end. And, under the circumstances, the potential evolution of the GDP is going to be fairly slow, said the president of the Fiscal Council, Ionut Dumitru, who is also the president of the Association of Financial and Banking Analysts in Romania:
“In my opinion, at the moment, we are talking about potential growth of around 1% up to 2% on the short and medium term. Capital will be harder to access and more expensive. As regards the labor force, we are happy that Romanians working abroad send money back home, but, on the other hand, their contribution to Romania’s economic activity drops. Therefore the labor force has a negative contribution to economic activity and demographic forecasts are dismal”.
Romania’s representative to the IMF, Mihai Tanasescu, has talked about the precautionary agreements Romania has concluded with the IMF and the European Commission. Those agreements focus on the reorganization of loss-making companies with a majority state-owned capital:
“Let’s not forget that 2012 is a year with strong commitments on the part of Romania, both to the European Commission and the IMF in terms of a gradual cut in the budget deficit. Let’s not forget that the reforms made in the state-owned companies will make them more efficient, but that will also entail public costs. Therefore the continuation of those reforms will bear fruit in the coming years. That is why it is very important to stress the need to carry on with the reform process, and in some fields reforms must be stepped up”.
The president of the Fiscal Council, Ionut Dumitru, also recalls that 2012 is an election year:
“In the context of this election year we must refrain from resorting to false electoral promises. We all know that that is very difficult in Romania, unfortunately, but there is no alternative, because the alternative is negative. At the moment we are on the right path, which will take us towards fiscal sustainability, but we have not reached the end of the road yet.”
Romania’s structural deficit will drop from 2.8% of the GDP in 2012 at 0.1% in 2013 and will thus range within the limits of up to 0.5% of the GDP recently set at the European summit, says the head of the IMF mission to Romania, Jeffrey Franks quote. “When we calculate the budget deficit (depending on the GDP) we also calculate the value of this percentage in the event of economic growth at a normal rate. The result is what we call structural deficit. In the economic boom periods, the structural deficit is bigger than the budget deficit, but if economic difficulties occur, the structural deficit becomes smaller than the budget deficit” Jeffrey Franks told Mediafax news agency. (Source Radio Romania International)
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