Fasten your seatbelts, because the Romanian economy is taking off. The Gross Domestic Product went up 6.1% in the first quarter, exceeding even the most optimistic expectations. The surge was fuelled by increasing private consumption, which, in its turn, is due to wage increases, especially in the public sector.
What was looking increasingly likely in March, when the statistics indicating a 20% surge in retail sales in January were released, has come true in the meantime. The GDP growth rate in the first quarter exceeded the 4-5% levels and entered a record-high area: six and even seven percent.
This data verifies what has been felt for several months or even a year - the economy is about to take off.
Just take a look around and you will see that everything is actually experiencing growth. Retail sales in hyper/super/megamarkets, sales of fuel, of sweets, coffee, beer and insurance policies, the price of houses located in up-and-coming areas - everything is growing, even by 20-30 percent every year.
"We have clearly felt an increase in consumption as compared to last year. Customers are buying increasingly more products and they are paying increasingly more money. I don't know whether this was prompted by wage raises or by other causes," said Sdjan Mijuskovic, general manager of cosmetics company Avon Romania, whose sales went up some 30% in the first three months of the year.
According to data released by the National Statistics Institute, wages did indeed go up - by 26% in ROL from the corresponding period of last year, which accounts for a 12% growth in real terms, inflation not considered.
The growth triggered by the increasing private consumption is being closely analysed both by the inflation watchdog, namely the National Bank of Romania, and by the International Monetary Fund (IMF). The dangers are inflation and trade deficit, if such growth is not accompanied by financing.
"The first quarter growth is truly spectacular. However, although accelerated growth should be a positive sign, there are several elements that should make us stop and think. First, we should be concerned with the fact that demand was the most dynamic element (up 8.4%), which outpaced the growth of gross capital formation (up 7.3%). A country such as Romania, for which the upgrading of the technological basis is crucial, cannot afford to build economic growth on boosting domestic demand over investments. The related risks involve a surging foreign deficit and the emergence of inflationary pressures. It is worth noting that, by wider regional standards, irrespective of the particular country or historical period, growth in private consumption in excess of 8% is rather exceptional," explained Radu Craciun, senior analyst with ABN Amro.
Fears of unsustainable growth should be appeased by the 5.8% increase in industrial output in the first quarter of 2004 and the reduced trade deficit in March.
sorin.pislaru@zf.ro ; razvan.voican@zf.ro ;
georgiana.stavarache@zf.ro
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