Business leaders assess economic outlook
Misu Negritoiu, General Manager, ING Bank
The risk is that the recession could yet deepen, but GDP growth should bottom in the third quarter 2009. We now see GDP falling by 7.5 per cent (the initial projection was a decline of 7.1 per cent), but we are more optimistic than the IMF.
The prospects of the Romanian economy remain poor even though we believe GDP could pick up in fourth quarter 2009 and grow in 2010 by 1.6 per cent if there is a favorable base effect, faster recovery abroad and monetary stimulus. Although we have been saying the key rate is unlikely to go below eight per cent this year, now we believe it could reach 7.75 per cent by the end of 2009 and further interest-rate cuts are in the pipeline next year, with a good chance for the key rate to reach 6.75 per cent.
A strong recovery seems unlikely in spite of official talk of a V-shaped pattern given the weak consumption and pressures from the ballooning budget deficit.
Regarding the first sector projected to post positive growth (in annual terms), we believe this is likely to be the industrial sector. A positive reading could be recorded in fourth quarter 2009 as the recovery of our main EU trading partners seems to be picking up momentum. It is also worth noting that the base effect is also favorable. The recovery of services should be slower as key components of this sector depend on consumer spending.
Adrian Adam, Director of Sales & Marketing, Radisson SAS Hotel
Investment growth and a dynamic economic development are crucial for the hotel industry. These factors are governed by economic stability and the creation of a friendly business environment. Unavoidably, the hotel industry has also been affected by the decline in GDP, which has been mirrored by the decrease we have recorded, particularly in the corporate-events segment. We hope to see an improvement and recovery in the
hotel business this autumn.
If we consider the gap between Romania and other countries in the evolution of the crisis, I believe we have yet to experience all the painful effects of the crisis, which other countries saw as early as last winter. In our country, the crisis will only show its true strength this autumn. Business people will see more severe effects of the crisis, which will truly test their managerial abilities and business acumen. And I believe that, apart from macroeconomic strategies, the government should look for alternative solutions in the private sector and implement them. The private sector, on which economic growth is based, must be encouraged both through legislative measures (tax exemptions, tax breaks on reinvested profit, stimulating job creation and stabilizing the national currency) and through consultations on economic and fiscal policies.
I believe the sectors that will be among the first to recover are industrial production, retail, tourism, pharmaceuticals, telecommunications and capital markets.
Peter Rothbart, General Manager, Beacom Technologies
The service sector will have a positive impact on the situation and I believe that our industry will increase during the first half of 2010.
Depending on the political environment and the government’s fiscal policy, a return to a positive growth could be reached by the end of 2010.
Most of the production sectors will grow as soon as the situation in Europe improves. The hope for Romania is that exports to the countries of the European Union will again increase.
Sergiu Negut, Executive Director, Unirea Medical Center
Healthcare is known to be one of the industries least influenced by economic cycles, and consequently it is barely affected by the crisis. However, while demand stays constant, the industry is influenced by severe declines in purchasing power, reduced availability of financing for development, delayed collection and most importantly for the Romanian market, reduced budgets for services paid for by the public health insurance office. As a result of new clinics and services being opened to the public in the last year, I see the total market for private medical services growing by approximately ten per cent in 2009.
It took almost one year after the recession in western economies to see an impact in Romania, but the impact was much stronger. When speaking of recovery, it is clear that the Romanian economy will recover only after the recovery in western Europe. The only question is how long a delay we shall see this time.
The Romanian economy relies heavily on foreign investment and this is the first indicator to watch. For individual sectors, the ones to see consistent growth are those able to attract further investments. However, there will be other industries responding faster to the recovery in the wider European Union. Companies and sectors where Romania is an important exporter for western countries will catch up faster as a result of the recovery of their markets.
Lucian Anghel, Chief Economist & Head of Market and Macroeconomics Research Division, BCR
Despite the progress made in the last few years, the restructuring process of the real economy is far from complete. With local demand crushed by much scarcer liquidities than had been coming from abroad in the last few years and increased caution among both lenders and borrowers, Romania’s economy is likely to contract by eight per cent in 2009. The specter of dwindling income and higher unemployment is certainly a deterrent, while confidence indicators point to stabilization at low levels, at least in the short run.
The local economy grew 3.5 times faster than the Eurozone average in the last five years, while hefty FDI inflows proved very useful in paving the way to a more efficient and flexible economy, able to respond better to both domestic and foreign demand. Economic expansion was also largely sustained by too vigorous consumption, boosted by rapid growth rates in income and a wide range of loan-based products amid tightening competition in the banking market.
Romania entered recession with a time lag of one quarter after the Eurozone, and there might be chances of a slight recovery in seasonally-adjusted terms in late 2009. The first sector to recover might be industry, supported by higher external orders.
Rethinking Romania’s growth model is crucial for securing a long-term competitive advantage over other countries. Agriculture, infrastructure and energy are three key areas that, when supported through public policies, may act as a catalyst for further involvement of the private sector in the economy.
Laszlo Diosi, Chairman of the Board, OTP Bank Romania
The ratio of the overdue loans will further increase, but of course this will vary between different product groups.
I personally believe that Romania’s economy will return to positive growth, starting from mid-2010. The reason is that the Romanian economy has very strong foundations and still has high potentials. The strict BNR regulatory and financial control framework provides the country with banking, financial and currency stability, as well as a low inflation level. Decreasing imports stabilize the level of domestic production, and foreign investors keep standing by their investments. The financial markets are liquid and many kinds of risks are beginning to seem manageable. However, the government still has to do a lot to improve both the macro- and the microeconomic situation. Consumption will still suffer, especially compared to previous years. I believe that the production, agricultural and energy sectors will grow first.
Mihai Marcu, President of the Board, Medlife
By the fourth quarter 2009, Romanian GDP should fall by four per cent. However, it should reach positive growth at two per cent in 2010. Despite the poor economic circumstances, health ambulatory services will grow strongly, as high as 20 per cent. The health, pharma, and food sectors should be among the first to return to positive growth.
Cristian Vencu, General Manager, Giotto Advertising
Most of the Industrial branches are connected to each other so any movement up or down of any of the activities creates effects all around.
We cannot speak about an economy when we are importing more than we export. We are not able to create conditions for tourism and we’ve sold off the main, profitable Romanian companies at prices that were too low.
In the following years, some sectors are going to continue to grow or to return to 2008 levels, including the food industry and the distribution and drinks industry.
Calin Tatomir, General Manager, Microsoft Romania
I am optimistic about getting to positive growth, but to me this is not a sign of overcoming the crisis. Economists are now taking about a W-shape recovery for GDP growth. Let’s hope when we will look back in three to five years we will instead see a V shape.
I believe that we can see the consolidated growth by 2013 and I feel that the impact of the crisis can be overcome in five years. We have seen the Romanian auto industry staring to grow, and here we need to be cautious not to base the growth solely on this industry. We are still missing a fiscal incentive plan for the economy. However, I think we will remain, for a while, a country based on consumption. I am optimistic that the IT industry will start growing again and have a greater economic impact.
The risk is that the recession could yet deepen, but GDP growth should bottom in the third quarter 2009. We now see GDP falling by 7.5 per cent (the initial projection was a decline of 7.1 per cent), but we are more optimistic than the IMF.
The prospects of the Romanian economy remain poor even though we believe GDP could pick up in fourth quarter 2009 and grow in 2010 by 1.6 per cent if there is a favorable base effect, faster recovery abroad and monetary stimulus. Although we have been saying the key rate is unlikely to go below eight per cent this year, now we believe it could reach 7.75 per cent by the end of 2009 and further interest-rate cuts are in the pipeline next year, with a good chance for the key rate to reach 6.75 per cent.
A strong recovery seems unlikely in spite of official talk of a V-shaped pattern given the weak consumption and pressures from the ballooning budget deficit.
Regarding the first sector projected to post positive growth (in annual terms), we believe this is likely to be the industrial sector. A positive reading could be recorded in fourth quarter 2009 as the recovery of our main EU trading partners seems to be picking up momentum. It is also worth noting that the base effect is also favorable. The recovery of services should be slower as key components of this sector depend on consumer spending.
Adrian Adam, Director of Sales & Marketing, Radisson SAS Hotel
Investment growth and a dynamic economic development are crucial for the hotel industry. These factors are governed by economic stability and the creation of a friendly business environment. Unavoidably, the hotel industry has also been affected by the decline in GDP, which has been mirrored by the decrease we have recorded, particularly in the corporate-events segment. We hope to see an improvement and recovery in the
hotel business this autumn.
If we consider the gap between Romania and other countries in the evolution of the crisis, I believe we have yet to experience all the painful effects of the crisis, which other countries saw as early as last winter. In our country, the crisis will only show its true strength this autumn. Business people will see more severe effects of the crisis, which will truly test their managerial abilities and business acumen. And I believe that, apart from macroeconomic strategies, the government should look for alternative solutions in the private sector and implement them. The private sector, on which economic growth is based, must be encouraged both through legislative measures (tax exemptions, tax breaks on reinvested profit, stimulating job creation and stabilizing the national currency) and through consultations on economic and fiscal policies.
I believe the sectors that will be among the first to recover are industrial production, retail, tourism, pharmaceuticals, telecommunications and capital markets.
Peter Rothbart, General Manager, Beacom Technologies
The service sector will have a positive impact on the situation and I believe that our industry will increase during the first half of 2010.
Depending on the political environment and the government’s fiscal policy, a return to a positive growth could be reached by the end of 2010.
Most of the production sectors will grow as soon as the situation in Europe improves. The hope for Romania is that exports to the countries of the European Union will again increase.
Sergiu Negut, Executive Director, Unirea Medical Center
Healthcare is known to be one of the industries least influenced by economic cycles, and consequently it is barely affected by the crisis. However, while demand stays constant, the industry is influenced by severe declines in purchasing power, reduced availability of financing for development, delayed collection and most importantly for the Romanian market, reduced budgets for services paid for by the public health insurance office. As a result of new clinics and services being opened to the public in the last year, I see the total market for private medical services growing by approximately ten per cent in 2009.
It took almost one year after the recession in western economies to see an impact in Romania, but the impact was much stronger. When speaking of recovery, it is clear that the Romanian economy will recover only after the recovery in western Europe. The only question is how long a delay we shall see this time.
The Romanian economy relies heavily on foreign investment and this is the first indicator to watch. For individual sectors, the ones to see consistent growth are those able to attract further investments. However, there will be other industries responding faster to the recovery in the wider European Union. Companies and sectors where Romania is an important exporter for western countries will catch up faster as a result of the recovery of their markets.
Lucian Anghel, Chief Economist & Head of Market and Macroeconomics Research Division, BCR
Despite the progress made in the last few years, the restructuring process of the real economy is far from complete. With local demand crushed by much scarcer liquidities than had been coming from abroad in the last few years and increased caution among both lenders and borrowers, Romania’s economy is likely to contract by eight per cent in 2009. The specter of dwindling income and higher unemployment is certainly a deterrent, while confidence indicators point to stabilization at low levels, at least in the short run.
The local economy grew 3.5 times faster than the Eurozone average in the last five years, while hefty FDI inflows proved very useful in paving the way to a more efficient and flexible economy, able to respond better to both domestic and foreign demand. Economic expansion was also largely sustained by too vigorous consumption, boosted by rapid growth rates in income and a wide range of loan-based products amid tightening competition in the banking market.
Romania entered recession with a time lag of one quarter after the Eurozone, and there might be chances of a slight recovery in seasonally-adjusted terms in late 2009. The first sector to recover might be industry, supported by higher external orders.
Rethinking Romania’s growth model is crucial for securing a long-term competitive advantage over other countries. Agriculture, infrastructure and energy are three key areas that, when supported through public policies, may act as a catalyst for further involvement of the private sector in the economy.
Laszlo Diosi, Chairman of the Board, OTP Bank Romania
The ratio of the overdue loans will further increase, but of course this will vary between different product groups.
I personally believe that Romania’s economy will return to positive growth, starting from mid-2010. The reason is that the Romanian economy has very strong foundations and still has high potentials. The strict BNR regulatory and financial control framework provides the country with banking, financial and currency stability, as well as a low inflation level. Decreasing imports stabilize the level of domestic production, and foreign investors keep standing by their investments. The financial markets are liquid and many kinds of risks are beginning to seem manageable. However, the government still has to do a lot to improve both the macro- and the microeconomic situation. Consumption will still suffer, especially compared to previous years. I believe that the production, agricultural and energy sectors will grow first.
Mihai Marcu, President of the Board, Medlife
By the fourth quarter 2009, Romanian GDP should fall by four per cent. However, it should reach positive growth at two per cent in 2010. Despite the poor economic circumstances, health ambulatory services will grow strongly, as high as 20 per cent. The health, pharma, and food sectors should be among the first to return to positive growth.
Cristian Vencu, General Manager, Giotto Advertising
Most of the Industrial branches are connected to each other so any movement up or down of any of the activities creates effects all around.
We cannot speak about an economy when we are importing more than we export. We are not able to create conditions for tourism and we’ve sold off the main, profitable Romanian companies at prices that were too low.
In the following years, some sectors are going to continue to grow or to return to 2008 levels, including the food industry and the distribution and drinks industry.
Calin Tatomir, General Manager, Microsoft Romania
I am optimistic about getting to positive growth, but to me this is not a sign of overcoming the crisis. Economists are now taking about a W-shape recovery for GDP growth. Let’s hope when we will look back in three to five years we will instead see a V shape.
I believe that we can see the consolidated growth by 2013 and I feel that the impact of the crisis can be overcome in five years. We have seen the Romanian auto industry staring to grow, and here we need to be cautious not to base the growth solely on this industry. We are still missing a fiscal incentive plan for the economy. However, I think we will remain, for a while, a country based on consumption. I am optimistic that the IT industry will start growing again and have a greater economic impact.
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