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| PROSPECTS FOR 2009 05/01/2009 |
| (2009-01-05) |
| Last updated: 2009-01-05 15:11 EET |
The coming of the new year puts an end to the Romanians' euphoria, as two years after their country’s EU accession and the highest economic growth rate ever, they are now suddenly compelled to tasting the sour fruit of the global economic crisis. Analysts say that the year 2009 will be a year of higher prices, of a growing unemployment rate and a drastic drop in investment. It will be a year in which the national currency, the leu, will continue to depreciate, and in the first part of the year one Euro will sell for 4.3 to 4.5 lei. The consequence of this depreciation will be higher prices, of foodstuffs in particular. It is expected that in mid January, imported foodstuffs will be 5% more expensive.
The price-hikes will hardly be compensated for with increases in salaries, because most of them will only be made on paper. A good example is that of the teaching staff, which during the election campaign were promised a 50% pay rise. Finance Minister Gheorghe Pogea says, though, that salaries and pensions are impossible to raise, because there is not enough money in the state budget. He has warned that the measure endorsed by Parliament, which the former government failed to put into practice, could lead to the firing of 80 thousand employees per month in the first quarter of the year, raising to 700 thousand the number of the unemployed in Romania.
Anyway, there are many companies saying that the 2008 financial year ended below expectations and they do not exclude the possibility of having no choice this year but lay people off or freeze salaries. A study conducted by a management consulting company shows that half of the employers in Romania will let people go in 2009. The national car making industry, which contributes 10% to the GDP, has already been seriously affected by the economic crisis.
Car makers very much depend on state granted loans and on the fate of the controversial pollution fee whose value was tripled at the end of last year. It is expected that the activity of car maker Dacia Renault will slow down dramatically, just like in other economic sectors, such as the steel industry. The situation is serious at ALRO Slatina, in the south, the larger aluminium producers in central and eastern Europe, where one third of the employees might be made redundant, since production has been cut by 50%. The crisis is also getting deeper at Arcelor Mittal steel works in Galati, eastern Romania, where 1,000 workers will be laid off. At the same time, the crisis will affect the Romanian market of household appliances, which has already taken a downward trend, and retail trade will record negative figures.
Though in 2008, due to favourable weather conditions, the Romanian farmers' incomes registered the highest growth rate in the whole of the EU, after Bulgaria, employers in the field claim Romanian agriculture in 2009 is very likely to experience the effects of the economic crisis the hard way. According to them, some 15% of the Romanian farmers will go bankrupt. Also worrying this year is foreign investment, though in the past years Romania has been an attractive destination for investors.
At the end of 2008, two rating agencies, Standard & Poor's and Fitch removed Romania from the list of countries recommended to new investors and only Moody's postponed a prognosis, in expectation for the measures promised by the new cabinet in Bucharest. For the time being, the new Romanian government has proposed a budget deficit of 1.7% of the GDP, based on drastic cut in expenses. Analysts are a lot more pessimistic though. They say the deficit is very likely to reach 7%, given that the year 2008 ended with a 5% deficit.
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2025-04-03
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