The Romanian exports trends of Q1 2020

Newsroom 12/05/2020 | 14:44

The economic crisis is a global crisis and Romanian exporters need support, because they create a positive external balance for Romania, which influences the most important sectors of activity. Exporters have the potential to grow into the New Normal (post-Covid-19 era) and generate well-paid jobs and prosperity for Romanian companies.

By Claudiu Vrinceanu

 

The exports of Romanian companies suffer a lot as a result of the evolution of COVID-19. But in the context of an imminent economic crisis, the situation of firms will worsen and exports will become more relevant than ever. The reduction of production capacities, the problems related to transport, the lack of imported raw materials and the cancellation of commercial contracts are the main reasons invoked by the Romanian exporters and importers for the contraction of foreign trade.

Over 50% of exporters holding 62% of Romania’s exports estimate export contractions: 32% of them estimate a decrease of up to 25%, 12% between 25% and 50% and 7% estimate an export contraction of over 50% , according to the National Institute of Statistics. The main causes for these reductions were: reduction of production capacity (16.6%); transport problems (22.4%); temporary legal export bans (16.5%); lack of imported raw materials (14.1%) and cancellation of contracts (9.1%).

In this context, the exporters request the unblocking of the Export Promotion Program, suspended on March 3, 2020 for an indefinite period by the decision of the Minister of Economy, provided that the necessary funds exist. This blockage of the project generates the risk that Romanian companies will no longer be able to participate in the second part of the year in international fairs and exhibitions that are possible to organise and, therefore, will mean the reduction of export capacity. The program can be implemented for certain fairs and exhibitions through a series of principles agreed with employers’ and professional organisations without endangering the health of representatives of Romanian companies.

A good idea would be also that in the case of fairs, exhibitions and certain target destinations for which promotion actions cannot be organised abroad, the available funds should be allocated for participation in digital actions (online fairs, international meetings in digital format, online economic missions ).

These proposals are urgent because the context is negative for Romanian exports: the exports decreased by 11% to 6.13 billion euro in March, compared to the same month of 2019.

Also, Romanian entrepreneurs propose the identification and support of Romanian champions in the effort to internationalize Romanian companies or digital products, along with maintaining tax facilities for employees in the IT & C sector to maintain the competitiveness of the sector at the regional level.

The trend of decline is at European level, as German exports plunged in March due to the coronavirus pandemic and the indicator recorded its steepest monthly erosion since the data was first published in August 1990. On the other hand, the exports from China  exports saw a 3.5% rise in April despite the global pandemic, partly due to rising medical exports.

According to some experts from World Trade Organisation (WTO); the impact of the COVID-19 outbreak on international trade is not yet visible in most trade data, but some timely and leading indicators may already yield clues about the extent of the slowdown and how it compares to earlier crises. ” Indices of new export orders derived from Purchasing Managers’ Indices (PMIs) are particularly useful in this regard. The JP Morgan global PMI for March, for instance, showed export orders in manufacturing sinking to 43.3 relative to a baseline value of 50 and new services export business dropping to 35.5, suggesting a severe downturn”, based on the research Trade and COVID-19: The WTO’s 2020 and 2021 trade forecast.

Business investment is likely to take a double-digit hit this year and European exporters will be faced with a sharp drop of global demand and the severe disruptions to the free movement of people, goods and services, based on European Commission estimations.  The current pandemic is a truly global shock. Overall, global GDP is projected to contract by about 3% this year. Again, a sharper drop than experienced during the financial crisis. It is then expected to rebound by 5% in 2021. “Global trade is expected to take an even sharper hit. World import volumes (excluding the EU) are likely to fall by more than 10% this year. Real-time indicators reveal this shock. The downturn was so abrupt that it is not easy to have ‘hard’ data capturing the impact.”

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