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| THE ECONOMIC SITUATION IN ROMANIA AT THE START OF THE YEAR 14/01/2009 |
| (2009-01-14) |
| Last updated: 2009-01-15 15:11 EET |
After reaching one of the highest GDP growth rates in the European Union in 2008, Romania is forced, early into 2009, to forget about its past achievements and wake up to the cold realization that it is faced with an economic crisis just like most of the Union’s 27 member states. The first signs of the crisis came last year when a number of foreign investors cancelled their plans to come to Romania, a country formerly seen as safe and profitable in terms of labour costs.
Soon afterwards, steel factories like Arcelor Mittal and the country’s biggest car maker Dacia Renault cut their production, which caused a chain reaction: dozens of other manufacturers and service providers are now about to close down or lay off some of their staff. The National Bank of Romania did its best to keep the inflation rate in check, but this month Romanians will probably start feeling the economic crisis in their pockets as well. A very worrying fact is the devaluation of the national currency, the leu, which will lead to more expensive imports, basic foods, services and hard currency bank loans.
Amidst uncertainties over the internal political situation, experts say that at the beginning of the year the leu has become more volatile compared with the currencies of neighboring countries such as the Polish zloty and the Hungarian forint, which have depreciating at a slower pace than the Romanian currency. The president of the Applied Economy Group in Romania, LIviu Voinea, believes the leu’s depreciation might come to an end when Bucharest signs a loan agreement with the IMF, which Romania gave up in 2007, when it became a member of the European Union. Liviu Voinea:
“I anticipated the collapse of the leu that started in June 2007 and has continued. It is hindered occasionally by the National Bank of Romania, but the tendency is for it to depreciate because the fundamentals of the economy are getting worse. There is a connection between the depreciation of the leu and the budget deficit, because we need to finance the short term debts of companies and the government, debts which are growing. As a result, the leu will continue to fall until we make a loan from the IMF.”
The government is trying to take Romania out of the crisis despite the fact that its platform is said to be too vague. Finance minister Gheorghe Pogea on Tuesday was quoted as saying that Romania’s economic growth in 2009 is estimated to fall from 7.95%, as forecast last year, down to under 3%.
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