Romania unlikely to come out of recession before 2010

Any predictions for macroeconomic indicators were simply foiled by the advent of the crisis, so everything that analysts estimated at the end of 2008 has been adjusted. From the exchange rate (EUR/RON) predictions alone, it's obvious that the current crisis has thrown out any benchmarks. At the end of 2008, specialists said that the exchange rate would stay at RON 3.75-3.95/EUR. But the European common currency in fact has been worth around RON 4.00 for almost all of the year so far, and signs are that it will not dip below that benchmark figure for the rest of the year. While 2009 has not been the most auspicious of years, nor do predictions for 2010 look too promising. Financial analysts say that the local economy will give its first signs of recovery only in the fourth quarter of this year, after reaching a trough in the third quarter. Some green shoots are already visible, say some. According to specialists, industry is among the sectors that have already shown the first signs of recovery. But despite this, a real improvement in the local economy depends on future developments in the Euro zone. GDP under pressureAnalysts from ING anticipate that GDP could grow by 1.6 percent next year, based on a quick international recovery and monetary policy incentives. As for 2010, experts believe that in the first quarter of next year, the local economy will shrink by 0.5 percent. Furthermore, according to an ING Bank Romania report, there is little prospect of a strong rebound for the local economy, despite talk of a V shaped recovery. The same report found a risk of deepening recession, but predicts a trough in the third quarter of 2009. Dragos Cabat, managing partner at advisory company Financial View, says that GDP will likely drop by 8.5-8.7 percent this year, and by 0.5-1.5 percent next year. “The evolution of GDP will be influenced first of all by the recovery of EU countries – mainly Romania's commercial partners and also those places where Romanians work, like Germany, Spain, Italy, Greece and Ireland – and second of all by the resumption of the lending cycle to near normal levels, especially on the corporate segment,” Cabat tells Business Review. In his opinion, the local economy will probably come out of recession in the second or third quarter of 2010.

FDI still on hold
At international level, including the EU, the appetite for investment will most likely recover at least half a year after the biggest economic powers emerge from the crisis. In particular, Romania's attractiveness for FDI will depend largely on structural reforms. “In 2010, the investment in Romania will be about EUR 5-6 billion,” adds Cabat. Moreover, in the first five months of this year, the volume of FDI was EUR 2,475 million, compared to a total volume of EUR 9,084 million in 2008, according to Romanian Agency for Foreign Investment (ARIS) data. In 2009 the total number of new registered commercial companies with foreign capital was 3,267, according to the same data.
anda.dragan@business-review.ro