Romanian 1Q GDP Dn 2-4.1%, Analysts See Technical Recession

The six economists interviewed by MEDIAFAX estimate a GDP contraction between 2% and 4.1% in the first quarter, with an average of 2.9%, while half of them already see a technical recession after the first three months of the year.

Economists typically define a technical recession as two successive quarters of falling GDP.

ING Bank Romania economist Nicolaie Chidesciuc, BRD chief-economist Florian Libocor, and the general manager of the macroeconomic forecasts institute MacroAnalitica, Laurian Lungu, estimate that the country’s economy fell by 2.5% on the year in the first three months of 2009.

According to Chidesciuc, the industrial sector registered the highest decrease, of over 10%, the services sector might have slightly fallen while the constructions sector registered a positive evolution, and possibly the agriculture as well.

"For this year, I anticipate a continuation of the economic contraction until the third quarter and a slight improvement in the last three months. For the fourth quarter, I estimate a 1.3% GDP fall, and a 3.5% economy contraction for 2009," ING Bank Romania economist stated.

Libocor considers that the first quarter evolution mirrors a slowdown in most of the economic sectors.

As for the technical recession, Libocor considers that it is subject to interpretations and subjectivism.

Libocor also estimates a slowdown of the growth engines in 2009, concurring with a negative growth rate of -0.5% of the GDP in real terms.

Lungu also stated that the industrial sector registered the highest fall in the first three months, the agriculture sector “slightly increased”, while the services and constructions sectors registered a slowdown.

"We might face technical recession, but I don’t think we will be there for a long time," Lungu said.

The analyst considers the economy will register a negative trend in the first six months, then, it will recover to the end of the year in the context of the EU economy recovery.

Lungu estimates a 0.7% GDP fall in 2009.

Ionut Dumitru, chief-economist of Raiffeisen Bank Romania, estimates a GDP fall of 2-3% on the year in the first quarter, with an 11% contraction in the industrial sector. Dumitru also agreed that the country might face technical recession.

According to Raiffeisen chief-economist, the country’s economy will register a 2% decrease in the first six months of the year.

Nevertheless, Volksbank chief-economist, Melania Hancila, and UniCredit chief-economist, Rozalia Pal, are more pessimistic regarding the evolution of the economy in the first quarter.

Hancila estimates the GDP will register a negative dynamics of approximately 2% in 2009, if the government commits to significantly invest in infrastructure, thus compensating the decrease in the residential sector, and if banks resume lending.

On the other hand, Pal estimates a 4.1% GDP fall on the year in the first quarter, given that industrial production contracted by 15 – 16%, and the retail sector fell by 6%.

The National Statistics Institute, or INS, will publish Friday the first quarter GDP data.

The country’s economic growth registered a slowdown at 2.9% in the last quarter of 2008, hitting a 9-year low as regards the last quarter of a year, thus the GDP was limited to 7.1% in 2008, higher by 1.1 percentage points compared with 2007, according to INS data.

Late March, the head of National Prognosis Commission CNP, Ion Ghizdeanu, stated that Romanian gross domestic product is seen contracting by 2.9% in 2009’s first quarter to RON88.5 billion, from RON91.13 billion in the first three months of 2008.