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Fiscal Council head warn Romania could enter technical recession
The risk of technical recession, in the second half of 2019 or in 2020 is very high, Dan Bucsa, chief economist for Central and Eastern Europe with UniCredit Bank London has said on Tuesda, romaniajournal.ro informs.
“The risk of recession in Romania, in the second half next year or in 2020 is very high. If Europe grows by 1%, maybe we will avoid the recession. But if it grows by less than 1% we will most likely face recession. Our forecasts point to a slowdown of economy in 2020 to about 2%. Firstly because the support for consumption cannot remain as high, secondly the stocks contributions would cease at a certain moment, thirdly investments will fall and fourthly we do not envisage ways for exports to grow, although a home appliances plant will be inaugurated at the end of 2019. The automotive industry is closing to the end of cycle in Europe, but it can be stimulated by ‘scrap car’ programmes,” Bucsa said.
UniCredit Bank anticipates a 4% GDP growth for Romania this year, capital.ro reports.
Dan Bucsa has questioned the growth of agriculture, given the African swine fever and the cereals crops, whereas the international prices of wheat and corn are almost the same as last year.
“I believe Romania’s economy will grow by less than 4% this year, my argument is the serious decrease in constructions. Industry and retail trade have slowed down against the past years. So, where does the 4% growth come from?” Bucsa asked.
His statements were made after the Fiscal Council President, Ionut Dumitru, said Romania is on the brink of recession, due to public debt.
“The public debt plays a very important role. Theories point to several thresholds above which the public debt turns negative for economic growth. BNR estimates it to 40-45%, close to the threshold after which the likelihood of recession is increasing rapidly. We are very close to this threshold,”Dumitru said.