Exchange rate fluctuations, high interest rates for loans in RON, unfavourable international conditions and the instability of the fiscal legislation.These were the causes too often mentioned this year by representatives of major companies in Romania of their worse than expected results.
Add to this the floods, which seriously affected agriculture, and you can get a complete picture of the economic situation over the first half of the year.
The consequences of these factors did not take long to show. Gross Domestic Product (GDP) increased by a mere 4.9% in the first six months of the year, compared with 6.6% for the first half of 2004. And analysis of GDP structure by use does not produce any better results: growth in consumption reached a record high for the last 16 years (11.2% compared with the first six months of 2004), while investment rose by only 7.6%, compared with a 10.4% increase in the corresponding period last year.
Consumption growth also exceeded that of investment for the first time in the last three years. Added to this, GDP witnessed its slowest quarterly growth for three years. Growth of the economy for the second quarter of this year was a mere 4.1% when compared with the period in 2004.
Looking at GDP structure by resources, services saw growth at 6.9%, the highest in four years. Construction industry ranked second, with 3.9% growth, the lowest for four years (in the first six months of 2004 it grew by 8.6%). Industry was at its lowest for four years, too, growing by only 3.6%, after growth of 5.9% last year. Having been affected by the bad weather, agriculture is also at a four-year low, after seeing a decline of 7.1%, from 5.3% in growth in the first half of 2004.
Government officials have announced an economic growth rate of 5.5-6% for this year. However, the results for the first half tell a quite different story. "Mathematically speaking, we can still achieve a 6-percent growth rate," says Liviu Voinea, research director at Applied Economics Group (GEA). GDP can still increase enough in the second half to offset the poorer performance seen in the first half."
However, the GEA analyst said it was the quality of the growth, rather than its quantity, that was of most importance in the current situation. Faster growth in services and construction was likely in the second half, he said. GEA''s forecast for the third quarter sees industry posting a low level of growth, with the floods in July-August jeopardising the contribution of agriculture to GDP for this quarter. "The floods will be a major factor in slowing down growth," Voinea said.
Economics professor and former finance minister Daniel Daianu told Ziarul Financiar he had always doubted the 6% growth figure set for the economy this year. "I didn''t believe it because there were predictable shocks, which contributed massively to the economic deceleration we are now seeing. The first expected shock was the deregulation of power prices, and the increase in tariffs in this area dealt a massive blow to the economy since our industry is highly energy-intensive - we produce inefficiently and the end consumer consumes inefficiently as well," the former finance minister explained.
The second shock to the economy, continued Daianu, was the massive appreciation of the RON against the euro. "The effects of the appreciation are incommensurable in the real economy, since many producers found themselves caught between a rock and a hard place."
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