The evolution of the Romanian economy shows rather a decrease and a recession, being “worrying” especially from the perspective of the budget and the deficit for the next year, as well as the existing solutions to carry out the necessary corrections, says Cristian Păun, professor of economics in within the Bucharest Academy of Economic Studies (ASE), according to Agerpres.
According to the data published on Thursday by the National Institute of Statistics (INS), the gross domestic product did not change in the third quarter of this year, compared to the previous quarter, on a seasonally adjusted series, while compared to the same quarter in 2023, the GDP decreased by 0.2%.
“This development looks more like a decline and a recession. It doesn’t even look like economic stagnation anymore. It’s very worrying, especially from the perspective of the budget and the deficit next year – and the solutions we still have at our disposal to carry out the necessary corrections. It is an extremely bad idea to rely on an increase in taxes, as a solution to the excessive deficit crisis. Any proposal to increase taxes on such an evolution becomes unsustainable,” said Cristian Păun, university professor at the Faculty of International Economic Relations (REI) at the Academy of Economic Studies (ASE) Bucharest.
In his opinion, we will see the bill very soon, because currently, before the elections, politicians systematically avoid discussing the solutions and what will happen from January.
“Unfortunately, it (the bill, n.r.) is not being debated at the moment, before the elections, so that people are informed and warned of what will follow in the next period. Politicians systematically avoid discussing the solutions and to discuss what will happen from January. Certainly, as these figures, coming from the INS – and which were predictable, things cannot be at all hopeful or very optimistic. We will see what solution he will choose Finally, the Government. I hope that this solution is not the easy way that means an increase in taxes, an increase in VAT, because the effects will be adverse and, in any case, we will not reach prosperity in such a situation it will be easy for the Government that will come to administer this complicated situation, which does not leave much room for maneuver for the next period”, said the economics professor.
He states that the situation has reached this way for at least three reasons: the decrease in industrial production, the delay in the absorption of European funds and the decrease in agricultural production due to drought.
“The first of the causes is related to the fact that we have an industrial production that is decreasing. Orders from the industry are visibly suffering, mainly because we have decreases from outside the country. The Romanian economy is related to strong industries, providing those complementary deliveries for sophisticated products We have such a decrease from Germany and France. The second reason is that we have a big delay in the absorption of European funds, both on the PNRR and on the funds from the new programming, where we have not collected any euros so far, although the new budget programming started from 2021. We are in the fourth year that ends without absorbing a single euro – and we have three more. The performance is derisory in this area, not to mention the major delays on the PNRR and the fact that the amounts expected from the PNRR are significantly cut from one tranche to another, including as a result of the refusal to fulfill the conditions, to carry out the reforms, to pass the benchmarks that we assumed ourselves when we proposed this plan of return, of recovery after the pandemic crisis. Agriculture is the third reason why the GDP does not grow. If we put all three: the decrease in industrial production, the European funds and the decrease in agricultural production due to the drought, we get the overall picture”, explained Cristian Păun.
In his opinion, there are little chances that in the fourth quarter there will be a significant evolution that would confer an increase in GDP to the expected level.
“We have a decrease in the first quarter, a slight increase in the second quarter, of 0.1% – and we still have 0% for this quarter, according to the INS announcement. (…) Poor chances that we will have an evolution in the fourth quarter significant that would confer an increase in GDP at the level we expected to happen, when we built the budget, we projected the expenses for this year. Obviously, we also have a moderation of consumption, because, people all hitting this inflation, which shows no signs of abating – and consumption has adjusted significantly.