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| THE WEEK IN REVIEW 15-21/02/2010 |
| (2010-02-19) |
| Last updated: 2010-02-22 13:37 EET |
Romania is still in recession, but it will overcome it in the first quarter of the year mainly as a result of an industrial recovery. This assessment was made by Bucharest’s representative to the International Monetary Fund, Mihai Tanasescu, who also warned about the need to implement structural reforms. Romania’s economy went into recession in the third quarter of 2008 and, according to the National Statistics Institute, it has continued to shrink ever since. In the 4th quarter of 2009, for example, it shrank by 1.5% compared to previous quarter and by 6.6% compared to the same period in 2008.
One good thing, according to Tanasescu, is that industrial output, the manufacturing and the energy sectors are on the increase. Bucharest received more pieces of good news this week from the EU finance ministers council, who approved the next payment of a loan granted by the European Union so that the money should be made available at the beginning of March. Romania obtained a 5 billion euro loan from the European Commission as part of a medium term financial assistance package. So far, Romania has received 1.5 billion euros of this loan. In addition, Bucharest obtained a 2-year loan of 13 billion euros from the International Monetary Fund. The total amount of Romania’s foreign loan, provided by the International Monetary Fund, the European Union, the World Bank and the European Bank for Reconstruction and Development amounts to 20 billion euros.
The government in Bucharest has extended the lending ceiling for the First House programme and has modified conditions for granting loans. The authorities are hoping to attract more people than last year, when only 11,000 contracts were signed. The new version of the programme maintains the minimum required down payment of 5% and low interest rates.
The difference lies in the amounts guaranteed by the state, that is starting from 60,000 euros for the purchase of old houses and 70,000 euros for new houses and even 75,000 euros for the members of an association of minimum 7 persons who want to built an apartment building together. According to the minister for regional development, Elena Udrea, the First House programme also covers the houses built by the National Housing Agency. Last year, when the programme was first launched, the National Loan Guarantee Fund only gave away 450 million euros of the 1 billion euros allocated by the government, while the rest of the money is redistributed this year.
Also this week, the year’s first stage of the ‘’Car scrapping program’’ was launched. People who have their old car scrapped are given a voucher they can use to purchase a new car. The scrapping bonus is still 3800 lei, that is about 900 euros, the same as last year. The news is the appearance of interchangeable vouchers. As compared to previous years, everyone can have 3 old cars scrapped and thus benefit from a total 2700-euro reduction when buying a new car. Additionally, as of this year, companies will also be able to buy cars through this program, within a 200 000-euro threshold per year.
Prime Minister Emil Boc:
“More than 60 000 old cars will be scrapped this year, with the funds that the government will allocate. This will help the environment and provide new jobs as well as helping the local industry, which still needs support.’’
The European Car Builders’ Association has said that car sales in the EU, that some states back via the scrapping bonus, saw a 12.9% rise in 2009. More than a million cars were registered in the EU last month. According to the Association, registrations in Romania saw an 80% decrease in 2009, the most severe in all EU states.
A survey shows that a mere 5% of Romanians believe that Romania will recover from the crisis this year. The largest part of the population expects a recovery only in 3 years’ time. Business people are equally sceptical and believe that the authorities’ economic predictions for this year are too optimistic. They estimate an economic growth of a maximum 1%, as compared to 1.3%, as authorities say and an unemployment rate higher than 8%. Representatives of the Business People Association in Romania believe the evolution of the main economic indexes could be even more negative in the absence of business environment support measures. Among other negative factors, they criticise excessive red tape, the blocked private sector and the absence of major projects, especially in the field of infrastructure, which could benefit from European financing.
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