Economy won’t reach peak growth potential for another three years

The economy will see moderate growth this year, no more than 1.5%, driven by industry and exports and will only reach its peak growth potential, 5 or 6% as late as 2012, according to Mihai Tanasescu, Romania’s representative to the International Monetary Fund.

“I am optimistic, but how we’ll recover what we lost over the past year and how fast we’ll manage to achieve the 5 or 6% growth economic growth potential that Romania has is up to us,” Tanasescu told an economic seminar. He believes Romania needs a new economic growth model and can no longer rely on foreign debt to avoid reverting to the same problems that caused the recession in the first place.

Radu Craciun, chief investment officer of Eureko Pensii, also sees the need for a radical change of how the Romanian economy has been managed, considering the time of cheap money from abroad is gone. “Romania’s performance is pitiful because it failed to take advantage of the European Union funds and with money no longer that cheap this is a crime,” he says.

The analysts attending the seminar organised by Finmedia unanimously agreed that the economy would slightly rebound this year with industry as its main growth driver.

“We will see a slight economic growth, which will come from industry, whose performance was one of the best in the European Union. November figures show the industrial output is only 2% lower than the pre-crisis level,” says Ionut Dumitru, Raiffeisen’s chief economist.

Florin Pogonaru, chairman of the Business People Association of Romania (AOAR) says the industry is indeed beginning to rebound, which will fuel export growth since there is not enough domestic demand.

“2010 is a year that starts badly and ends well. We will see some dramatic changes of the landscape around us because the euro zone needs to be rebuilt institution-wise,” Pogonaru believes.

Economists say that a potential acceleration of the economic growth over the coming years will be up to the continuation of the reforms agreed upon with the IMF, to the modification of the fiscal policy and to regaining the trust of foreign investors.

“We need a selective policy to help the economy and make the business environment predictable, so as to allow it to develop in the long run. The social welfare system will be redesigned in Romania soon and expenses will be have to be directed to the investment sector,” Tanasescu said.

Aurelian Dochia, chief executive of Concept Business Consult, says the economy will be driven by foreign investment. “Foreign investment will continue to drive the economy because the pressure on Western companies to relocate is still high. We are well positioned in this regard,” Dochia stated.

Romania could also benefit from its position as a country on the border of the EU, considering Western firms will try to conquer the Eastern European market in the years to come. “Romania remains attractive. The next bridgehead of eastward expansion of the European market will be built here,” says Florian Libocor, BRD’s chief economist.