Damages caused by drought, hail and floods, estimated by the Agriculture Ministry at over 9,200 billion lei (about 440 million dollars), are so high that they will upset the Government’s entire economic programme for this year, including projected economic growth of 1.5 percent of the Gross Domestic Product.
“The effects of calamities will trigger chain reactions and will be felt not only at the level of budgetary deficit, in the case of additional expenditures, but also at the level of revenues, consumption and trade balance,” economic analyst Alexandru Tasnadi maintains.
The Agriculture Ministry (MAA) calculated these damages following effective measurements operated so far and following estimations for the next period, for crops that will be harvested.
Of the 3.5 million hectares of affected crops, the largest land areas are represented by wheat and rye – 700,000 hectares, maize – over 900,000 hectares, sunflower – 22,000 hectares and fodder plants – approximately 150,000 hectares, as well as 1.1 million hectares of natural meadows.
These damages were supplemented by losses registered following spring floods, amounting to 2,214 billion lei (over 100 million dollars), that destroyed agricultural crops, as well as houses, household annexes, bridges, national and county roads. Therefore, losses caused by nature cost Romania approximately 550 million dollars.
“Even though the Government is doing its best so as to offset losses, they will be reflected at the level of the entire economy and will jeopardise economic growth,” Tasnadi also says.
The Agriculture Ministry yesterday asked the Government to supplement the budget by 4-5,000 billion lei, in order to grant coupons that would cover 20-25 percent of the production value, so as to finance seeding. The ministry also requested compensation in cash for crops that were more than 70% destroyed.
“I think that the request of the Agriculture Ministry is exaggerated considering the current state of the budget. Additional allocations will be granted, but they will not amount to 5,000 billion lei,” said Sebastian Vladescu, a secretary of state with the Finance Ministry.
“There will be drops in consumption, which will come from the population in depressed areas, because there will be drops in revenues as well. But, since at present there is no tax on income derived from agriculture, it is hard to believe that budgetary revenues will be hurt. There are credit lines opened by the US Government for the financing of cereal imports, therefore part of the necessary amount of foreign currency will come from this direction,” he added.
However, the trade balance and implicitly the payment balance might be affected, as there will be additional imports of cereals, which were not taken into account at the beginning of the year.
“Romania might pay a lot for the potential cereal imports, because over 40 percent of agricultural output has been affected by drought and hail, and agricultural productions of neighbouring countries have been hurt to an equal extent,” Vladescu also said.
“Whether losses are covered by the budget or not, eventually the citizens will be the ones to pay. It is dramatic because, unlike industrialised countries, in Romania the industry is subsidised by agriculture. Agriculture remains the scapegoat of forced industrialisation,” Tasnadi maintains.
Agriculture, silviculture and hunting, which contribute around 14 percent to the Gross Domestic Product, were the only economic branch that posted increase last year, by about five percent.