The gross domestic product in Q1 went up 4.8% compared with the same time last year, which spells Godspeed for Nastase Cabinet. Two dangerous tidal waves are forming at the horizon, though, ready to turn the ship around: the inflation and the trade deficit.
The trend is due to the 11% increase in the industrial output, which now accounts for 34% of GDP, compared to 27% at the end of last year.
This increase is practically a very good sign for the current Government, but is somehow shadowed by the rather high inflation, namely 11% over the first four months of this year, likely to reach 30-33% for the entire year, as well as the Q1 trade deficit: imports outstripped exports by $820 million, 2.5 times more than last year, when the gap reached only some $300 million.
“The growth is alright, it’s in line with the trend. These figures might ensure 4% growth for 2001. The rise in the trade deficit could pose kind of a threat though, due to the slowdown in exports, given the slowdown in EU’s economic growth (i.e. 70% of Romanian exports go to EU), as well as the ever fiercer competition from other countries in the area, such as Turkey or Bulgaria,” Lucian Liviu Albu, head of the Prognosis Institute within the Romanian Academy, told Ziarul Financiar.
Romanian economy’s rebound after three years of steep decline started showing in October 1999, Albu feels.
“Let’s pretend this trend is like a ball going down: the lower it falls, the higher its speed. All it takes the ball to go down is no obstacle in its way,” Albu says when commenting on the trend taken lately by the Romanian economy.
Such an obstacle could be the rise in prices and salaries, which would show in inflation. “An upfront opposition to new increases in prices and salaries is a very good signal which the Government seems to want to send out,” Albu added.