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Analysts anticipate economic crisis ahead, recession looming

The figures released on Tuesday by the National Statistics Institute (INS) pointing to a y.o.y. economic growth of 4%, but to a slim 0.3% growth – almost stagnation – in Q1 2018 vs. Q4 2017 is an alarm signal, some analysts say.

Three economic analysts requested to comment by daily ‘Adevarul’ consider the stagnation is anticipating nothing good.

Thus, Ilie Serbanescu says last year the economic growth was registered by the multinationals, not by Romanian owned companies, which made steps back. “INS should have presented the figures separately, on how much did the multinationals grow and much did the Romanian companies grow. The multinationals’ money goes back where they’ve come from,” he said.

Asked about the consequences for Romanians, Serbanescu said someone has to pay, it will be the Romanian people. “Recession is in force after 6 consecutive months of stagnation or negative growth. Three months have already passed, if we ignore the slim growth in Q1. When economy grew, Dragnea (PSD leader – our note) gave the money to pensions and wages. Now he will have to cut them, as it happened in 2019. The Romanians will pay,” Serbanescu added.

Mircea Cosea says he had expected even poorer results, given the three alarm signals: high budget deficit, balance of payments deficit and the trade balance deficit. The latest figures reveal orders for industry have slowed down. “All these, corroborated with the lack of predictability from the tax revolution, influence the production. We have no elements to support an important economic growth,” Cosea says.

He argues investments are urgently needed and consumption should be reduced. “INS should have said: 2017 was not great, but 2018 is disappointing,” Cosea says.

The analyst says the ruling coalition would not dare cut down wages. “They could increase the public debt, sealing new loans. The impact of the loans will be seen after 2030, when Romania could have Greece’s fate,” he added.

Cristian Paun, economic professor with the Academy for Economic Studies (ASE) played down the risks ahead, says it’s only a slowdown in growth. However, if no measures are made, we could face again the situation eight years ago.

“The Government should solve the structural problems. Populism does not lead to economic growth. We have record deficits. (…) The crisis will certainly come, we had a boom and such periods are followed by recession.(…) We’ll have recession, it will be tougher than for the neighbouring countries. I remind that in 2009 the economy fell by 18-19%, more than any other one in the region. Romania is selling illusions. It’s impossible to give everyone special pensions! They should understand the resources are limited,” Paun said.

He argues Romanian will increase public debt and decrease expenditures, including wages and, maybe, freezing the pensions, as in 2010.

 

 

 

 

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