www.business-review.ro Business Review | June 6 - 12, 2011
6 MONEY ANALYSIS
Romania: recession free? With estimated economic growth of about 2 percent this year, Romania has emerged from the recession but still has a long way to go to get through the current economic crisis. In order to help ensure sustainable growth, the government must develop a clearer and more predictable taxation system, say experts. will be felt by Romanians at the end of 2011,” says the analyst. He adds that Romania will register economic growth of about 2 percent this year, with sustainable growth for the Last month the National Institute of Stacountry on the medium term – the next tistics announced that Romania had three to five years – of 3.5-4 percent.” A emerged from recession, after the country more accelerated economic growth could posted a 0.6 increase percent in its GDP in bring about a macroeconomic imbalance, the first quarter of 2011 on the preceding which has already affected us in the past,” quarter. Prior to that, in the last quarter of cautions Cabat. 2010 the local economy inched up 0.1 perGibbins believes that to help ensure suscent from the third quarter of last year. This tainable growth, the government should means that Romania has registered growth develop a clearer and more predictable taxin two consecutive quarters which technically constitutes coming out of recession, ation regime. “The current system has become very complex and many investors according to commonly accepted ecospend a lot of time on tax administration, nomic principles. It’s encouraging news for everyone, which potentially diverts resources from commercially productive activity. The govbut while the country is now back in ernment should try to avoid making growth territory after two and a half years changes to the tax system at short notice, of recession, the economic problems are far which can be destabilizing for business. In from entirely solved. “The country is out addition, the tax authorities should speed recession because of the high demand for primary industrial products from Germany, up the process of granting refunds when taxpayers are eligible for them,” urges GibFrance and other EU members. Many manbins. ufacturers from the EU focused on cutting Asked what Romania should do to encosts as a result of the current economic crisure sustainable long-term economic sis and the fierce competition from China growth, the KPMG representative says that and other emerging markets. Romania the government should considerably immanaged to get out of recession mainly beprove the rate of absorption of EU funds, cause of this increased demand from more advanced EU countries,” says Dragos Cabat, particularly for infrastructure projects. managing partner at efin.ro. He adds that “Large sums are available in EU funding which can be used Romania is among the for infrastructure last countries to projects, presentemerge from recession ing a historic opbecause of the restricportunity for modtive policies of the governization. This ernment. “In addition, gives the chance local consumption is not only for Romabased on credit and Romania’s quarterly increase nia to become more the remittances sent in the first three months competitive as an home by Romanians of 2011 against the investment destiwho work abroad,” he preceding quarter nation in the long notes. term, but also to aid Mark Gibbins, partner, head of taxation services at KPMG, short-term recovery because an EU-funded infrastructure development program strikes a cautious note, warning that just as would boost the economy and create jobs. a country can enter a technical recession by It would particularly benefit the construcregistering negative growth in two suction industry, which has been especially cessive quarters, when in fact other ecohard-hit by the recession,” says Gibbins. nomic indicators give a different picture, so In his opinion Romania presents many optoo can an economy enter a technical reportunities for investors, and he believes covery. “It is still too early to say whether Romania has truly emerged from recession, that this is a good time for businesses that and opinion is divided on the subject. may have been cautious about emerging markets since the start of the recession to Some economists think that Romania still look at Romania again. “While we are unhas some difficult years ahead and there are likely to see a return to the very high shortcertainly challenges, such as growing defaults on mortgage and consumer loans. term returns which many investors made in 2005-2008, there are many sectors with The budget deficit is still high and the potential for steady, long-term growth, government must maintain discipline to such as renewable energy, healthcare, pharfulfill the conditions of its agreement with maceuticals and tourism,” says the KPMG the IMF,” advises Gibbins. partner. In addition, Cabat predicts that exEmerging from recession doesn’t mean ports and services will continue to be the that Romania has passed the current downmain drivers determining Romania’s ecoturn. Cabat says that usually there is a gap nomic growth in the future. “Consumption, of about six to nine months between exitconstruction and agriculture will start their ing the recession and the moment when engines later and move at a lower speed,” he standards of living start to improve. “That’s concludes. why we can estimate that economic growth
∫ ANDA SEBESI
0.6%