May 16, 2004
Good economic news
Romania's economy is still ticking along.
It grew in the first quarter at a rate of about 5.3% (annualized). This means that Romania is heading into a fourth year of respectable growth.
Inflation is falling -- still high, but falling. It was 14% last year, is presently around 12%, and is expected to fall to 9% by the end of 2004. (The National Bank has been talking very, very tough about this.)
Foreign investment is growing quickly, although from a very small base. Lending is growing like mad, around 50% per year.
The biggest flea on the dog is the foreign trade deficit, which is just getting bigger and bigger. I blogged about this a few months back. Not much has changed since then, except that the numbers have continued to edge upwards. Romanian exports are up, but imports are up even more.
Oddly enough, this has not led to downward pressure on the leu... yet. In fact, the leu has strengthened by about 3% against the euro since the beginning of this year. But a developing country can't run a big trade deficit forever. So, unless corrected, this is going to cause problems at some point.
Still, overall it's good news for Romania. Which is also good news for the ruling Social Democratic Party, the PSD. PSD faces local elections next month and then national elections in November. At this point they're expected to coast to a win... though, of course, November is a long way away.
One oddity: after three, now going on four years of good economic news, Romanians seem as pessimistic as ever. Am I missing something? Anyone?
Try to manage with 2 kids, a wife and yourself on an average Romanian wage. That is 100-150 dollars. All that numbers don't mean much when your rent is unpaid and the million lei you left behind the Carrefour counter didn't cover half of your needs. Call it pesimism if you want, but the big picture doesn't put food on my table. Yet.
Posted by: Tina at May 17, 2004 03:29 PMHmmnn. France circa 1788. (Not that I think anybody's gonna get their head cut off.) But expectations tend to rise faster than reality...
Posted by: Bernard Guerrero at May 17, 2004 05:52 PMIt grew in the first quarter at a rate of about 5.3% (annualized). This means that Romania is heading into a fourth year of respectable growth.
Not all indicators look that good.
You should also see the external debts statistics:
- oct. 2000 - $9.1 billion
- dec. 2003 - $15.5 billion
Not to mention that half of the exports are from textile sweatshops. (using lohn)
So, unless corrected, this is going to cause problems at some point.
Yeah, but only after the elections this year.
Also, why do I get an error if I enter my email address from @ h o m e . r o ? :-)
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Bogdan,
H*me.ro is sending us a lot of comment spam, so it got banned. Sorry that this is hitting you but we don't want all those p*n*s enlargement and v**gr* pill adds here. Just fill in an imaginary email adress with something like @yahoo or so. That will work fine -- your comment is always posted with your URL, not your email anyway.
Thanks.
Claudia
Posted by: Doug Muir at May 17, 2004 09:44 PMTina, you make a really good point. You're certainly right -- times are still hard for most people here in Romania. If my post sounded like "gosh, gee, why aren't people happy," I apologize -- that's not what I meant to say.
I guess what confuses me is that there doesn't seem to be a sense of things getting better. I meet very few people who seem to believe in Romania's future. There are exceptions, but the average person seems very pessimistic, and reluctant to believe that things might really improve.
But the numbers say that things have improved, at least in the last 3-4 years. So what's up?
Well, maybe the numbers are wrong, or incomplete. For instance, it's possible that most (or all) of that growth is going to a small group of people who are already rich or well connected, and the average Romanian isn't seeing any improvement in everyday life. That's one possibility. (It's the official position of at least one opposition party, too -- the Democrats, I think. They say that the PSD and its friends are soaking up all the growth.)
Or could it be that people are reluctant to hope? I have a friend who works for the Peace Corps, and this is what she believes -- she says that the people she works with have been disappointed so many times that they've become deeply fatalistic and pessimistic.
Me? I don't know what the answer is. That's why I'm asking. Is there a sense of things gradually getting better? Or do people think that the country is going nowhere, and that the best thing would be to leave ASAP?
Posted by: Doug Muir at May 18, 2004 10:43 AMI think it is a little bit of both. I have a number of friends who are disgusted about what is going on in Romania nowadays. I mean some of those who didnot immigrate. Yet. And they certainly have some serious arguments. On the other hand there's also some who are either optimistic (like myself) or don't give a damn about what's going on - it's somewhat a smaller ecosystem they live in.
If you look up the stats back in the early 90s Romania also had a growing GDP backed up by a pile of inventory that nobody could ever monetize. But it looked so good on the paper. As such, even though the figures are encouraging and I am among the strong believers that in Romania there's a lot of potential to be exploited, I always take the stats with a grain of salt.
My feeling is that the Romanian market nowadays is starting to getting some sort of an identity IN SPITE of the crappy political or business environment. It is true that there's a number of healthy individuals that took/take the cream of the best opportunities on political connections but the size of the country and the hugely unexploited opportunities combined with the Romanian entrpreneurship (still in incipient phases but we can be so inventive sometimes) make me a strong believer in us as a nation. With all bad parts included. However, it takes time for building a healthy system and it requires a BROAD involvement, and the national pessimism as you call it certainly is not a good sign.
Posted by: Dragos at May 19, 2004 02:09 PM