Analysts Say Economy Will Rise In 1Q, Businesspeople Are Pessimistic

04.04.2013 By Ioana David , Claudia Medrega , Cristina Roşca

Analysts believe the Romanian economy will remain on the rise in the first quarter of this year and keep their estimates for 2013 gross domestic product, but signals from the economy are less optimistic.

The economy will continue to rise in 1Q of 2013, driven by the positive contribution of industry, trade and services, which will offset the negative contribution of the construction sector and of agriculture, economists say.

Most forecasts range between 0.5% and 1.6%, with economic growth driven by consumption.

The first quarter of 2013 came with mixed news for the main macroeconomic indicators. After an improvement in foreign perception of Romania, which had a positive impact for the treasury’s borrowing costs and the leu’s exchange rate, enthusiasm gradually relented.

Lending is declining, budget revenues are flat and the rate of EU fund absorption remains low.

Messages from the real economy are pessimistic. Businesspeople remain skeptical as to a rebound of the economy and expect economic measures that can encourage consumption and stimulate GDP growth. They cite the “confusing” messages coming from the political leaders, which can only induce a lack of confidence among consumers.

“The first quarter was very difficult, and we don’t have the same growth rate we did in the similar period of last year. Sales have risen, but not so much, that is why we are concerned about what will happen in the near future,” says Rand Sherif, who has been running Interbrands, the largest distributor of consumer goods, for over 14 years.

Sherif adds that these rises are not based on a spectacular increase in consumption, considering that people’s disposable income continues to be reduced.

Alexandru Vlad, who runs the Selgros cash & carry store chain, recently said there are no premises for a consumption increase as long as utility bills rise every month.

Violeta Luca, CEO of electronics and IT retailer Flanco, says the first quarter did not come with the expected rises on the company’s market.

“The weak start of the year has led me revise my market (growth) expectations for this year. Whereas at the end of 2012 and even two months ago I would have expected an increase of 7%-10%, now I don’t think we will see growth of more than 5%.”

This can be blamed on people’s lack of confidence in the economic, social and political world. Moreover, the signals sent by foreign markets have been negative, especially in March.

“Although the political environment is more stable, there have been no economic moves encouraging consumption.”

In turn, Daniel Negrescu, brand manager of Murfatlar, says the economy has not kept last years’ trend, which announced a tentative recovery.

Romania’s economic growth was revised up, from 0.3% to 0.7%, the statistics institute announced Wednesday. The revision surprised analysts because it was more significant than usual. The 0.7% rise places Romania among the fastest growing economies in the European Union.

(English version by Daniela Stoican)