Industrial decline sharpens: A W-shaped crisis is more plausible

Publish date: 07-10-2009
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The industry continues to decline, according to data published by the National Institute of Statistics (INS). Thus, net sales in industry fell by an annual 16.9 percent in August, due to declines in the manufacturing and extractive industries, of 17 and 15.3 percent, respectively.

Month-on-month, net sales in industry dropped 10.5 percent in August, due to a 10.9 percent contraction of business in the manufacturing industry, while the extractive sector rose 0.4 percent. August is the tenth consecutive month of decline in the industry sector, which has been severely affected by the economic crisis.

This extension of the decline worries economists, who tend to believe that the industry may take longer than expected to bounce back. Hopes in previous months are gradually being replaced by fears that the economy could relapse rather than recover, and that we might witness a W-shaped crisis.

Exports of Dacia cars to Germany - the engine of Romanian industry exports - are sliding. Furthermore, a relapse also seems more plausible in other EU countries. "We are not very optimistic. The "Rabla" [Ed. n. - trade-in] program in Germany is almost over, which will reduce Dacia car exports. A W-shaped economic scenario is gaining ground. There are also other factors that could lead to such a situation. There are the political tensions, which will also impact on the budget deficit," Vlad Muscalu, Senior Economist within ING Bank Romania, said.

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