Grey prospects ahead of Romanian economy in this year

The Romanian foreign trade risks going adrift, as the authorities cannot find levers to contain the skyrocketing of imports, while the incompletely restructured economy is unable to sustain long-term competitive exports.

At the beginning of a new year, right after Prime Minister Adrian Nastase had concluded 2003 with a glorious summation of the macroeconomic achievements, the official in charge of foreign trade, Eugen Dijmarescu, painted the prospects of 2004 in various shades of grey.

“We are really concerned about what may become of the trade deficit,” Eugen Dijmarescu says. He feels the major risk factors are the continuation of the rapid ROL depreciation against the EUR, the increase in the domestic production prices, the doubling in the income tax payable by exporters and last, but not least, the very nature of an electoral year. Eleven months through 2003, the trade deficit had reached 4.9bn euros, more than 30% higher than in 2002. Dijmarescu says the deterioration of the trade balance reflects the delays in restructuring the economy, which still does not meet the necessary criteria to be considered “functional.”

“The slow and delayed developments restructuring-wise are now showing in the foreign trade. The increase in the industrial output and the consumption is more and more dependent on imports,” Eugen Dijmarescu yesterday said.

Although not included in its direct competencies, the central bank was the first and only, until recently, to have sent out warnings about the increase in the trade deficit and the matching pressures on the current account. Which risk impacting on the ROL exchange rate, although the National Bank dismisses the idea of using the depreciation as a way to adjust the deficit.

Dijmarescu says the Government sent a number of normative act drafts to the Parliament, which stipulate the elimination of the low customs duties on imports made by depressed areas, the payment of the customs duties for the cars sold in leasing when they enter the country instead of calculating the duties in line with the residual value and applying the standard customs duties in the free zones. “We hope the Parliament will concur by enacting these measures, as this is the only thing needed for them to enforce,” said Eugen Dijmarescu, head of the Foreign Trade Department. These steps target reducing the possibilities to have different treatments in terms of customs duties for various import categories, which is against the provisions in the European Union.

Eugen Dijmarescu says it is very hard to maintain a certain export competitiveness if the ROL depreciation policy and increase in prices, that of energy inclusive, on the domestic market maintain. He explains he would have even resorted to a customs surtax levied on all imports to contain their growth, but such a step is not allowed at this stage of negotiations for EU accession and with the IMF.

“We would have to put the accession negotiations on hold to introduce such a step,” the minister added.

Romania has introduced a 6% flat surtax on imports in late 1998, in order to contain the skyrocketing of the trade deficit against a collapse of exports.

Romania’s current account deficit had exceeded 2.1bn euros ten months through 2003, and was therefore 74.2% higher than in the same time in 2002. The estimate for late 2003 is 6.5% of GDP. razvan.voican@zf.ro