The expected agricultural rebound and the reconstruction after the floods last year could take economic growth to an all time high. "Six-month economic growth stands at 7.4%, but if agriculture, and corn in particular helps us, we well reach an 8.5% growth this year," Adriean Videanu, executive chairman of the Democrat Party (PD) and one of the people who worked on the governing programme of the ruling Alliance, told ZIARUL FINANCIAR. "Flutur (Agriculture Minister i.e.), is reserved, but our simulations with the national accounts show that if agriculture does pretty well this year, we will have an 8.5% annual growth," says Videanu, who is also the mayor of Bucharest.
Analysts, as well as The National Forecasting Commission (CNP), the institution in charge of official economic estimates, lend support to Videanu's statements. CNP's chairman, Ion Ghizdeanu, says an 8.5% economic growth may happen this year, even though it is nothing more than an alternative scenario to the main forecast for the time being.
"If the economy maintains the same trend as it did in the first half of the year, and agriculture reverts to a 5 to 6% growth, we can have an 8-8.5% economic growth," Ion Ghizdeanu says. The preliminary forecast for this autumn, however, only includes a 6.7% GDP growth estimate at the moment, but it can be upped to more than 7% when the final forecast is made public, around October 20.
This year's GDP is put at 94.6 billion euros for now, if economic growth reaches 6.7%. Yet raising the growth forecast to 8.5% would take the economy close to 100 billion euros for the first time in history, compared with the 79.3 billion euros of 2005, when the GDP went up by only 4.1%.
The economy (the GDP) increased by 7.4% in the first half, and the figures of the CNP show that, without taking into account the fluctuations in the agriculture sector, GDP growth actually stood at 7.8%. Agriculture fell 0.4% in the first half, with this fluctuation meaning stagnation at the dismal levels of last year, when the agricultural yield was affected by floods, losing 14% of its value.
The economic growth record of the last 17 years was reached in 2004, when the GDP rose by 8.4%, following an outstanding farming year and to the high expenses made by the Nastase government before the electoral campaign.
Analysts feel that 8.5% economic growth is obtainable this year, but would not say how likely that is. "Agriculture added about two points to economic growth in 2004, taking it from 6.4% to 8.4%," estimates Florin Citu, ING Bank's chief economist. Citu added that agriculture is very volatile as a variable when it comes to computing the GDP and "this year's surprises, in terms of economic growth and inflation, can be really big."
Radu Craciun, chief analyst of ABN Amro, feels the same. He says agriculture has been the great unknown of the economic forecasts every year. "With its significant weight in the GDP, agriculture can decisively influence its growth," Craciun says.
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