Bloomberg News

Romanian Economy Slips Back Into Recession in First Quarter

May 15, 2012

Romania slipped back into a recession in the first quarter as a sovereign-debt crisis and a cold snap slowed exports and industrial output, threatening to widen the budget gap and forestall state wage increases.

Gross domestic product shrank a seasonally adjusted 0.1 percent from the previous quarter, after contracting 0.2 percent in the fourth quarter, the National Statistics Office in Bucharest said today in an e-mailed flash estimate. GDP grew a seasonally unadjusted 0.3 percent from a year earlier, below an 0.8 percent median estimate in a Bloomberg survey of nine economists. A detailed report will be released on June 6.

Romania is in its second recession in four years as Europe’s debt crisis slowed demand for eastern European country’s goods, including Dacia SA cars, making it harder for the new government to raise public employees’ salaries 8 percent beginning in June. Freezing temperatures and heavy snowfall also disrupted transportation and supply chains.

The contraction “may trigger some policy-plan adjustments from the new executive, so it will be interesting to see if they fine-tune, broaden or move closer any of their current promises, which mainly have a flavor of fiscal easing,” ING Bank Romania economist Vlad Muscalu said in an e-mail after the GDP release.

Growth Outlook

The country will probably see growth slowing this year to 1.5 percent from 2.5 percent in 2011 as European spending cuts hinder export growth, according to International Monetary Fund forecasts. The economy will probably grow 1.4 percent this year, the European Commission said in its spring forecast published on May 11.

The benchmark BET stock index slid 2.7 percent to 4,688.64 at 11:24 a.m. in Bucharest, its lowest intraday level since Jan. 30, after the flash report. The leu strengthened 0.1 percent to 4.4409 per euro in Bucharest trading.

Planned state-wage increase and some payments to pensioners who overpaid for social contributions would widen the budget deficit to 2.2 percent of GDP this year from an initial target of 1.9 percent of GDP, the IMF said on May 9.

“For the time being, we stick to our GDP forecast for this year of 1.2 percent, but at the same time, we acknowledge that the growth risks are mostly biased to the downside,” Erste Group Bank AG’s Romanian economist Dumitru Dulgheru said. “April sentiment indicators for the euro zone -- the main trading partner of Romania -- came in disappointingly low, hinting at recession spilling over into the second quarter of this year.”

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus