Negritoiu: Dwindling incomes will lead to recession

Recession will be generated by the disappearance of some income sources following layoffs, wage erosion under the impact of RON decline and inflation, by the freezing of wage raises the market had grown used to and by the falling cash provided by banks, stated Misu Negritoiu, ING Bank Romania CEO. All these factors are expected to cause domestic consumer spending to shrink. "Recession in Romania will be particularly generated by the shrinking of consumer spending, in the form of consumer goods and real estate demand, that is exactly the items that have boosted economic growth in recent years (...)". The government and the NBR are banking, though, on growth by more than 2% in GDP, believing Romania is less vulnerable to the falling economies of Western Europe compared with other states. "(...) As a bank, we're looking at the market and we're wondering: where can growth come from? We can see trouble mounting in the car industry, construction materials, and metallurgy. Only some services can post a slight increase, such as telecommunications, which can at least stagnate, and the food industry," Negritoiu says. The banker says the engine that could revive the economy is likely to be represented by governmental expenditures and exports, but believes these are unlikely to function. "For the time being, we do not see the recession in the real economy, but only that in the financial sector. However, effects will spread in the economy and those who have benefited most from the strong consumer spending and cheap credit will be the most seriously hurt."