Government Says Romania Might Be Affected By New Recession, Caused By Japan Quake

04.17.2011 ZF English

Economic recovery is difficult and overdue, while the effects of the earthquake in Japan raise new concerns about the global recession that can affect Romania, given the "climate of psychosis around cataclysms," which can impact markets, according to the government's fiscal strategy.

Economic recovery is difficult and overdue, while the effects of the earthquake in Japan raise new concerns about the global recession that can affect Romania, given the "climate of psychosis around cataclysms," which can impact markets, according to the government's fiscal strategy.

In a document on the Government's macroeconomic forecast for 2012-2014, obtained by MEDIAFAX, the Executive estimates the economy will grow by 1.5% this year, but also considers the risks.

"The strategy has been developed in an international context still marked by risk and uncertainty, by divergent patterns of economic growth from one country to the next, by new geopolitical tensions, as well as fragile internal forecasts on the main macroeconomic indicators," says the strategy.

The Government hopes the slump in exports will not last long, trusting in the Japanese economy's high capacity.

The strategy also says economic recovery is vulnerable to negative developments on the foreign financial markets, which may be caused by rising risk premiums and lower capital inflows, and to the negative risks associated with the global economy's timid resurgence, risks that can also influence recovery in the Eurozone.

"Romania's recession has been one of the longest and most acute in Europe," says the document, which warns that the fiscal policy might stray from its targets because of the slow recovery expected in 2011, the ambitious correction plans, as well as the possible reappearance of political and social tensions, which can slow down/postpone the fiscal consolidation process. "Recovery is difficult and somewhat overdue, because of imbalances built up before the crisis and because the austerity measures were implemented starting with the second quarter of 2010," it says.

The "political risks" associated with the 2012 parliamentary elections are also considered, but the line is that reforms must continue, requiring "firm measures" from all ruling coalition parties, without giving in to electoral temptations or political pressure to reduce taxation or grant wage raises that can affect the already fragile macroeconomic balance.