Romanian economy, between gloomy forecasts and great expectations

How did the Romanian economy do in the first quarter? Did the gloomy forecasts (industrial output decline and disinflation slowdown) actually come true? Are the initial estimates (5.2% growth and 12% inflation) much too optimistic?
We now know that industrial output lost 0.2% in the first two months of the year as compared to the year-ago period. At the same time, most companies operating in the food industry, machines and equipment, wood processing and constructions say their activities slowed down in March.
Romania cannot afford a slowdown in the economic growth pace, as it has a lot of catching up to do before joining the European Union. The authorities shy away from comments, invoking the lack of data, but there are growing concerns over the economic evolution. Analysts would only comment under conditions of anonymity.
“As far as we can tell from the data so far, the authorities have good reasons to worry. If inflation exceeds 1.5% in April, it’s a very bad sign. Obviously, things are slowing down; we need other growth sources, as well, but there may be a problem because of small savings. That is why the authorities have come up with all sorts of initiatives lately, from cutting red tape to establishing new companies. Investments must get the go-ahead and the officials must enforce an aggressive policy to attract foreign investment,” an economic analyst said under conditions of anonymity.
The suspense will last until the Easter holiday is over, as the National Institute of Statistics is also on vacation and the first official data on the first quarter will not be released before May 7.
On the same day, the authorities are preparing to release updated macroeconomic forecasts, including the parameters from the Economic Pre-accession Programme. The National Bank will disclose its policy on interests and the exchange rate today.
The only statistical data available for March are about inflation and show that, from a 16.6% annualised rate in February, inflation bounced back to more than 17%. Consequently, the average rates offered by banks for deposits dropped even lower, below the inflation rate, and so did the average rates for T-bills. What will happen if inflation continues to grow in April, as all forecasts say? How will the real negative rates influence savings, which barely made it to 14% of GDP last year?
It can only be said that inflation expectations are still solidly anchored in the economy. According to recent polls, most companies expect price increases in the months to come. Data for the first half of April point to 1% inflation, but prices are expected to soar this week.
razvan.voican@zf.ro