This summer's drought could cost as much as 1% of GDP, but the losses could be compensated for by the boom witnessed in the constructions industry, believes the National Forecast Commission (CNP).
According to Ion Ghizdeanu, chairman of the CNP, a decline in agricultural production, caused by drought conditions, could affect the economy with losses of up to 1% of the Gross Domestic Product (at a maximum level of 1.1-1.2 billion euros), however, the positive results registered in the constructions industry, which are exceeding expectations, could offset these losses.
"Losses caused by the drought could reach up to 0.8%-1% of the GDP, if agricultural production falls by 10%, taking into consideration its share in the GDP," stated Ghizdeanu. This year, for the first time in 17 years, the constructions market will exceed the agricultural market in terms of GDP contribution. According to preliminary estimates, constructions will probably account for 9% of the GDP, whereas agriculture is expected to contribute less than 8%.
Although the extreme weather conditions appear to have affected many cultivated areas and several crops, the first quantitative appraisal can only begin in August at the earliest, explains the chairman of the Commission.
After the first summer harvest is quantified, the CNP will begin its analysis for the preliminary autumn forecast, which could modify the official estimates on the main macroeconomic data.
"Although agriculture is sure to suffer losses, they can be offset by higher than expected increases from several industries, in particular constructions", added Ghizdeanu
The constructions industry saw its market continue to boom in May, witnessing a 27% increase on 2006, according to data published yesterday by National Statistics Institute. For the first five months, the cumulated growth stood at 31.8%. In its spring forecast, the CNP considered a 17% increase of the construction market in real terms (above inflation), i.e. almost half the results registered for the first five months of the year.
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