«The Romanian economy will stagnate; we can only expect a growth based on election stimulus». The statement belongs to Liviu Voinea, currently the Budget Minister in the Romanian cabinet led by the Social-Democrat Victor Ponta. It was made in 2012, when Voinea was only the director of an NGO called the Group for Practiced Economy.
The complete quote: «The economy will stagnate in 2012. This means anything between minus 1% and plus 1%. I can’t see which might be the engines of growth in 2012, taking into account the exports grew by 55% between 2009 and 2011, so they can’t maintain the same rhythm without some fundamental technological changes and in the context of a stable exchange rate; the agriculture also strongly grew in 2011. The households’ consumption couldn’t increase, as the people’s revenues don’t grow and nor the number of bank loans will grow. As for the government expenses, they will decrease, at least on paper. We can actually expect an economic growth in 2012 only based on election stimulus and, if this takes place, it won’t be a healthy one. More than that, this prognosis takes into account a neutral economical evolution in Europe. If the recession continues in the Euro zone, Romania will also go back in the recession. So the optimistic scenario is stagnation and the pessimistic one is recession.»
Was he right? He was, as the GDP grew by 0.6% that year. But you know what? I suggest replacing 2012 with 2014, because “the engines of growth”, sorry, of stagnation, are about the same:
Exports? It’s obvious they can’t maintain the same growing rate – in the first half of the year the imports grew faster than exports and the commercial deficit increased compared with the same period of 2013. The agriculture? It’s evident it can’t have better results after the 2013 record. Most probably, it will even have a worse output. The households’ consumption is uncertain, as the collected VAT is pointing out, only 1.9% more nominally compared to 2013. The households’ revenues and expenses were lower in the first quarter of 2014 compared to the same three months of 2013; I’m curiously waiting for the data for the second quarter. The government consumption is also 0.3% lower in the first half of the year compared to the first half of 2013.
What do we have in the Euro zone? A growth by only 0.7% plus incertitude regarding the war in Ukraine. So which one is the optimistic scenario? Aloud, please! Oh, yes, plus 2.8%, “keep your mouth shut as we are now in power!”
Bogdan Glăvan,
Economy Professor, blogger at www.logec.ro
