The most challenging autumn in a decade is coming with a crucialquestion for the business environment: are there any chances wewill see growth again or are we sliding even further intorecession?
Insufficient demand, the financial crunch, the high loaninterest rates and RON decline are the main threats businesspeopleare facing. All this comes against an overall climate ofuncertainty, marked by the upcoming presidential elections that aregenerating renewed tensions between ruling parties, PD-L(Liberal-Democratic Party) and PSD (Social-Democratic Party), andis denting the government's capacity to make efficient economicdecisions for the exit from the crisis to come sooner.
The arrearage that has spread to the general economy will not goaway too soon as, on the one hand, consumption demand is still verylow, and, on the other hand, access to loans is still tight ascompanies' risk profile deteriorates and bankers' appetite for newexposures is falling.
In the second quarter, consumer spending fell by over 13%, whileinvestments in the economy plunged by almost 26%. Still, in thisenvironment marked by uncertainties, hopes reside in the rebound ofindustrial output, which climbed by 4.5% quarter-on-quarter. Manycompanies' survival depends, though, on a demand rebound in WesternEurope. Though, the lack of cash is highly complicating businessoperations.
Investment banker Doru Lionachescu of Capital Partners M&Aconsultancy, says the crisis fallout is not felt in the bankingsystem as banks have managed to offset profit drops by increasinginterest rates for good customers.
Thus, it is only now that the hard part begins, at the end ofthis year, when the economy is returning to banks the "present" itgot from them, namely the interest hike. Lionachescu says themarket is not improving and sooner or later banks will have to alsoaccept the alternative of taking stock from companies, so as not tocollapse under the debt burden.
On the other hand, RON/EUR exchange rate fluctuations continueto give the jitters especially to people with foreign currencyloans. However, some RON appreciation forecasts have also appearedon the market, and most analysts believe the NBR will not allow fora decline beyond 4.30-4.35 RON/EUR by yearend, now that the foreigncurrency reserve has reached a new all-time high of 27.7 billioneuros and Moody's rating agency kept Romania in the 'investmentgrade' category.
Companies' dwindling business has caused 550,000 people losetheir jobs.
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