To emerge from recession companies must start recruiting

Publish date: 17-12-2009
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A major criterion for establishing the moment when Romania will emerge from its recession is when private companies once again begin recruiting.

This was one of the conclusions drawn by Lucian Anghel, Chief Economist of BCR lender, during the presentation of the institution's latest report. However, analysts say that this criterion must be accompanied by others, such as the evolution of gross domestic product (GDP) and investments.

"There is no clear definition of recession or of emerging from recession. We must take into account a broader range of indicators, such as economic activity, unemployment, etc. We must look at the whole picture," added Ionut Dumitru, Chief Economist of Raiffeisen Bank Romania. According to the BCR report, the lender's analysts said that the economy will resume growth next year, at a 0.6 percent rate. For this year, BCR forecasts a 7.2 percent decline, revised slightly from the previous estimate, of -8 percent.

There are two ways to boost the economy in 2010: industry and exports. These are correlated, as industrial products (cars, car parts, machinery, etc.) will be the main goods sent abroad. "Exports will be the main engine of economic recovery in 2010. Our estimate is that GDP will post a 0.6 percent increase next year. Still, it is important to make the necessary restructuring, and think long-term. Investments in infrastructure are needed. We must take measures to boost exports," said Anghel.

As far as other indicators are concerned, BCR's Chief Economist said that Romania will miss its inflation target this year also. However, prices are expected to slow their growth pace in the near future, and bank analysts said inflation could even slide below four percent in 2010.

Regarding the budget deficit, BCR analysts estimate this will widen to 7.9 percent of GDP this year, then narrow to 6.8 percent in 2010 and to 6.1 percent in 2011. However, there is a chance that the government will meet the 5.9 percent deficit target in 2010. For this to happen, cutting public expenditure is absolutely essential, in spite of a short-term negative effect on GDP. "An increase in taxes should be avoided for as long as possible, given that such a measure would slow the economic rebound, and lower the political will to reform the governmental sector," indicates the report.

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